Nonparametric estimation of the cross ratio function (Q2183767)

The authors study a smooth, nonparametric Bernstein-based estimator for the cross ratio function \[\theta(t_1, t_2) = \frac{\lambda(t_1|T_2 = t_2)}{\lambda(t_1 | T_2 > t_2)}\] where \(T_1\), \(T_2\) are absolutely continuous variables and \(\lambda(\cdot| T_2 = t_2)\) and \(\lambda(\cdot| T_2 > t_2)\) are the conditional hazard rate functions for \(T_1\) given \(T_2 = t_2\) and \(T_2 > t_2\). The estimator is constructed, as follows. Let \((T_{1,1}, T_{2,1}),\dots,(T_{1,n},T_{2,n})\) be a sample from \((T_1, T_2)\), and set \[S_{j,n}(t) = \frac{1}{n}\sum_{i=1}^{n}I (T_{j,i} > t)~(j=1,2),\] \[S_{n}(t_1,t_2) = \frac{1}{n}\sum_{i=1}^{n}I (T_{1,i} > t_1,T_{2,i} > t_2).\] The empirical copula \(C_{n}\) given by \[C_n(u_1,u_2) = S_{n}\left[S^{-1}_{1,n}(u_1),S^{-1}_{2,n}(u_2)\right],\] and its Bernstein estimator is \[C_{m,n}(u_1,u_2) = \sum_{k=0}^{m}\sum_{l=0}^{m}C_{n}\left(\frac{k}{m},\frac{l}{m}\right)\binom{m}{k}u_{1}^{k}(1-u_{1})^{m-k}\binom{m}{l}u_{2}^{l}(1-u_{2})^{m-l}.\] The Bernstein estimator for \(\frac{\partial }{\partial u_2}C(u_1, u_2)\) is \[C_{m,n}^{(2)}(u_1,u_2) = \frac{\partial}{\partial u_{2}}C_{m,n}(u_1,u_2).\] The proposed estimator for the cross ratio function \(\theta(t_1, t_2)\) is \[\hat \theta(t_1, t_2) = \frac{\hat\lambda(t_1|T_2 = t_2)}{\hat\lambda(t_1 | T_2 > t_2)}\] where \[\hat \lambda(t_1|T_2 = t_2) = \frac{1}{b_{n}}\int_{0}^{\infty}K_{0}\left(\frac{t_1-s}{b_{n}}\right)\hat \Lambda_{m}(ds|T_2=t_2),\] \[\hat \lambda(t_1|T_2 > t_2) = \frac{1}{b_{n}}\int_{0}^{\infty}K_{0}\left(\frac{t_1-s}{b_{n}}\right)\hat \Lambda_{m}(ds|T_2>t_2)\] with \[\hat \Lambda_{m}(t_1|T_2=t_2) = \int_{0}^{t_{1}}\frac{-d_{s}C_{m,n}^{(2)}(S_{1,n}(s),S_{2,n}(t_2))}{C_{m,n}^{(2)}(S_{1,n}(s-t_2),S_{2,n}(t_2))},\] \[\hat \Lambda_{m}(t_1|T_2>t_2) = \int_{0}^{t_{1}}\frac{-d_{s}C_{m,n}(S_{1,n}(s),S_{2,n}(t_2))}{C_{m,n}(S_{1,n}(s-t_2),S_{2,n}(t_2))},\] and the smoothing kernel \(K_0\) is a continuous probability density function of bounded variation with bounded support. As \(n \rightarrow \infty\), it is assumed that \(m \rightarrow \infty\) and \(b_{n} \rightarrow 0\) with appropriate speed. The authors prove that under appropriate smoothness assumptions, as \(n \rightarrow \infty\), \((n\cdot m^{-1/2}\cdot b_n)^{1/2}[\hat \theta(t_1, t_2) - \theta(t_1, t_2)]\) is asymptotically normal, and its mean and variance are given explicitly. The finite sample performance of the estimator is assessed on simulated data for Clayton, Gumbel and Frank copulas. Its use is illustrated using a dataset on the relationship between food expenditure and net income.