Modeling high‐dimensional time‐varying dependence using dynamic D‐vine models

DOI10.1002/ASMB.2182zbMATH Open1411.62290arXiv1202.2008OpenAlexW2429027831MaRDI QIDQ4620154FDOQ4620154

Authors: Claudia Czado, Hans Manner, Carlos A. S. Almeida 

Publication date: 8 February 2019

Published in: Applied Stochastic Models in Business and Industry (Search for Journal in Brave)

Abstract: We consider the problem of modeling the dependence among many time series. We build high dimensional time-varying copula models by combining pair-copula constructions (PCC) with stochastic autoregressive copula (SCAR) models to capture dependence that changes over time. We show how the estimation of this highly complex model can be broken down into the estimation of a sequence of bivariate SCAR models, which can be achieved by using the method of simulated maximum likelihood. Further, by restricting the conditional dependence parameter on higher cascades of the PCC to be constant, we can greatly reduce the number of parameters to be estimated without losing much flexibility. We study the performance of our estimation method by a large scale Monte Carlo simulation. An application to a large dataset of stock returns of all constituents of the Dax 30 illustrates the usefulness of the proposed model class.

Full work available at URL: https://arxiv.org/abs/1202.2008

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zbMATH Keywords

time seriessequential estimationefficient importance samplingtime-varying copulageneralized autoregressive scoreD-vinesstock return dependence

Mathematics Subject Classification ID

Time series, auto-correlation, regression, etc. in statistics (GARCH) (62M10) Characterization and structure theory for multivariate probability distributions; copulas (62H05) Applications of statistics to actuarial sciences and financial mathematics (62P05) Sequential estimation (62L12)

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