KAUST DepartmentComputer, Electrical and Mathematical Sciences and Engineering (CEMSE) Division
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AbstractWe consider a special case of factor copula models with additive common factors and independent components. These models are flexible and parsimonious with O(d) parameters where d is the dimension. The linear structure allows one to obtain closed form expressions for some copulas and their extreme‐value limits. These copulas can be used to model data with strong tail dependencies, such as extreme data. We study the dependence properties of these linear factor copula models and derive the corresponding limiting extreme‐value copulas with a factor structure. We show how parameter estimates can be obtained for these copulas and apply one of these copulas to analyse a financial data set.
CitationKrupskii P, Genton MG (2018) Linear factor copula models and their properties. Scandinavian Journal of Statistics. Available: http://dx.doi.org/10.1111/sjos.12325.
SponsorsThis research was supported by the King Abdullah University of Science and Technology (KAUST). We would like to thank the anonymous referee, associate editor, and editor‐in‐chief for their comments that helped improve this paper.