Bayesian inference for the extremal dependence

DOI10.1214/16-EJS1162zbMATH Open1357.62213arXiv1601.01462MaRDI QIDQ73753FDOQ73753

S. A. Padoan, Giulia Marcon, Isadora Antoniano-Villalobos, Giulia Marcon, Isadora Antoniano-Villalobos

Publication date: 1 January 2016

Published in: Electronic Journal of Statistics (Search for Journal in Brave)

Abstract: A simple approach for modeling multivariate extremes is to consider the vector of component-wise maxima and their max-stable distributions. The extremal dependence can be inferred by estimating the angular measure or, alternatively, the Pickands dependence function. We propose a nonparametric Bayesian model that allows, in the bivariate case, the simultaneous estimation of both functional representations through the use of polynomials in the Bernstein form. The constraints required to provide a valid extremal dependence are addressed in a straightforward manner, by placing a prior on the coefficients of the Bernstein polynomials which gives probability one to the set of valid functions. The prior is extended to the polynomial degree, making our approach fully nonparametric. Although the analytical expression of the posterior is unknown, inference is possible via a trans-dimensional MCMC scheme. We show the efficiency of the proposed methodology by means of a simulation study. The extremal behaviour of log-returns of daily exchange rates between the Pound Sterling vs the U.S. Dollar and the Pound Sterling vs the Japanese Yen is analysed for illustrative purposes.

Full work available at URL: https://arxiv.org/abs/1601.01462

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zbMATH Keywords

angular measureBayesian nonparametricsBernstein polynomialsexchange ratesextremal dependencegeneralised extreme value distributionmax-stable distributiontrans-dimensional MCMC

Mathematics Subject Classification ID

Bayesian inference (62F15) Nonparametric estimation (62G05) Statistics of extreme values; tail inference (62G32) Estimation in multivariate analysis (62H12) Applications of statistics to actuarial sciences and financial mathematics (62P05)

Cited In (15)

• Title not available (Why is that?)
• A comparison of dependence function estimators in multivariate extremes
• Bayesian threshold selection for extremal models using measures of surprise
• Bayesian inference with dependent normalized completely random measures
• Modelling non-stationarity in asymptotically independent extremes
• Improving estimation for asymptotically independent bivariate extremes via global estimators for the angular dependence function
• ExtremalDep
• Estimation and uncertainty quantification for extreme quantile regions
• Models and inference for uncertainty in extremal dependence
• Partial Tail-Correlation Coefficient Applied to Extremal-Network Learning
• Bernstein polynomial angular densities of multivariate extreme value distributions
• A semi-parametric stochastic generator for bivariate extreme events
• Bayesian inference for extremes: accounting for the three extremal types
• Accounting for uncertainty in extremal dependence modeling using Bayesian model averaging techniques
• Consistency of Bayesian inference for multivariate max-stable distributions

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