An Alternative Approach to the Structure Determination of Hierarchical Archimedean Copulas

Authors: J. Górecki, Martin Holeňa
Publication year: 2013
Publication type: Konferenční příspěvek (mezinárodní konf.)
Periodical: Proceedings of the 31st International Conference Mathematical Methods in Economics 2013
Bibliographic citation: GÓRECKI, J., HOLEŇA, Martin. An Alternative Approach to the Structure Determination of Hierarchical Archimedean Copulas. In: VOJÁČKOVÁ, Hana, ed. Proceedings of the 31st International Conference Mathematical Methods in Economics 2013. Jihlava: College of Polytechnics Jihlava, 2013, S. 201-206. ISBN 978-80-87035-76-4.
ID: 455988

Abstract

Copulas offer very a flexible tool for a stochastic dependence modeling. One of the most popular classes of copulas is the class of hierarchical Archimedean copulas, which gained its popularity due to the fact that the models from the class are able to model the stochastic dependencies conveniently even in high dimensions. One critical issue when estimating a hierarchical Archimedean copula is to correctly determine its structure. The paper describes an approach to the problem of the structure determination of a hierarchical Archimedean copula, which is based on the close relationship of the copula structure and the values of measure of concordance computed on all its bivariate margins. The presented approach is conveniently summarized as a simple algorithm.