Documente Academic
Documente Profesional
Documente Cultură
to Copulas
Speaker: Hua, Lei
February 24, 2009
Department of Statistics
University of British Columbia
Outline
Introduction
Definition
Properties
Archimedean Copulas
Constructing Copulas
Reference
Introduction
Introduction
Introduction
history
Introduction
Why copula
Non-linear dependence
Be able to measure dependence for heavy
tail distributions
Very flexible: parametric, semi-parametric
or non-parametric
Be able to study asymptotic properties of
dependence structures
Computation is faster and stable with the
two-stage estimation
Can be more probabilistic or more
statistical
others...
Introduction
Why copula
Introduction
Marginal distribution functions
F x = P [ X x ] , G y = P [Y y ]
Introduction
G(y)
(1, 1)
(x, y)
H(x, y)
(0, 0)
F(x)
Introduction
The mapping, which assigns the value
of the joint distribution function to each
ordered pair of values of marginal
distribution function is indeed a copula.
Introduction
G(y)
(1, 1)
Copulas
(x, y)
(0, 0)
Joint distribution function
F(x)
H(x, y)
Definition
Definition
informal
A 2-dimensional copula is a
distribution function on [0, 1]*[0, 1],
with standard uniform marginal
distributions.
Definition
a generic example
1
Y
Definition
formal
C :[0,1 ] [0,1 ]
1. C u ,0=C 0, v=0
2. C u ,1=u
C 1,v =v
Grounded
(u2, v2)
(u1, v1)
3. v , v , u , u [0,1] ; u u , v v
1
2
1
2
2
1
2
1
C u 2 , v 2 C u 1 , v 2 C u 2 , v1 C u1 ,v 1 0
2-Increasing
Properties
Properties
Volume of Rectangle
V H = H u 2, v 2 H u1, v 2 H u 2, v1 H u 1, v1
(u2, v2)
(u1, v1)
Properties
Copula is the C-Volume of rectangle
[0,u]*[0,v]
C u , v =V c [0, u ][0, v ]
Copula assigns a number to each rectangle
in [0,1]*[0,1], which is nonnegative !
Properties
(1, 1)
(u, v)
A
(0, 0)
C u , v =V c [0, u ][0, v ]=V c AV c BV c C V c D
Properties
Example: Independent Copula
C u 1 , u 2 =u1 u 2 , u[ 0,1]
1.0
0.8
0.6
CI
0.4
0.2
0.0
1.0
0.8
0.6
0.4
u1
0.2
0.0
0.2
0.4
0.6
0.8
u2
0.0 1.0
Properties
Frchet Lower bound Copula
Properties
1.0
1.0
0.8
0.8
0.6
0.6
CL
CU
0.4
0.4
0.2
0.2
0.0
1.0
0.8
0.6
0.4
0.2
0.0
0.2
0.4
0.6
0.8
u2
1.0
0.0
u1
0.0
1.0
0.8
0.6
0.4
0.2
0.0
0.2
0.4
0.6
0.8
u2
1.0
0.0
u1
Properties
Any copula will be bounded by Frchet
lower and upper bound copulas
2
C L u1 , u2 C u1 , u 2 C U u1 , u2 , u[0,1 ]
Properties
1.0
0.8
0.6
CUI
0.4
0.2
0.0
1.0
0.8
0.6
0.4
u1
0.2
0.0
0.2
0.4
0.6
0.8
u2
1.0
0.0
Properties
Sklar's Theorem
Let H be a joint df with marginal dfs F and G,
Then there exists a copula C such that
H u , v =C F u , G v
If F and G are continuous,then the copula is
unique
Properties
Important Consequences
Properties
Other topics
Survival copula
Functional Invariance for monotone transform
Non-parametric measures of dependence
Tail dependence
Simulation
Archimedean Copulas
Archimedean Copulas
C u , v = g
[1]
g u g v
g :[0,1][ 0,]
g 1=0
[1]
g t , 0t g 0
0,
g 0t
t ={
pseudo-inverse of g
Archimedean Copulas
Archimedean Copula behaves like a binary
operation
Commutative:
C u ,v =C v , u ,
u , v [ 0,1]
Associative:
C C u , v , w =C u , C v , w, u , v , w [0,1 ]
Order preserving:
C u1 , v 1 C u2 , v 2 ,
u 1u 2 , v 1 v 2 ,[0,1]
Archimedean Copulas
Example:
Let g t =1t ,
t [0,1 ]
C u , v =max uv1,0
Frchet Lower bound Copula is a kind of
Archimedean Copula.
Archimedean Copulas
Archimedean Copulas have a wide range of
applications for some reasons:
Easy to be constructed
Many families of copulas
belong to it
Many nice properties
Constructing Copulas
The Inverse Method
Geometric Methods
Constructing Copulas
The Inverse Method
Given a bivariate distribution function H
with continuous margins F and G, invert to
obtain a copula:
1
C u , v = H F u ,G v
Constructing Copulas
The Inverse Method (Example)
Gumbel's bivariate exponential distribution
x
x y axy
1e e e
0,
H a x , y ={
, x , y0
otherwise
F u=ln 1u
1
G v=ln 1v
a ln 1u ln 1v
C a u , v =uv 11u1v e
Constructing Copulas
Geometric Methods
Without reference to distribution
functions or random variables, we can
obtain the copula via the C-Volume of
rectangles in [0, 1]*[0, 1].
Constructing Copulas
Geometric Methods (Example)
(1, 1)
Constructing Copulas
Geometric Methods (Example)
continuous
(1, 1)
v
When
uav
C a u , v =V C [ 0, u][0,1 ]=u
a
(0, 0)
Constructing Copulas
Geometric Methods (Example)
continuous
(1, 1)
When
11avuav
v
(0, 0)
C a u , v =C a av , v =av
Constructing Copulas
Geometric Methods (Example)
continuous
(1, 1)
When
u11av
V C A=0
a
(0, 0)
=>
C a u , v =uv 1
Constructing Copulas
Geometric Methods (Example)
continuous
C a u , v =u
C a u , v =av
C a u , v =uv 1
0uav a
0avu11a v
a 11a vu1
Reference
Reference
1. Joe, H. (1997) Multivariate Models and Dependence
Concepts. Chapman & Hall
2. Nelsen, R.B. (1999), An Introduction to Copulas
3. Schweizer, B. and Wolff, EF (1981) On nonparametric
measures of dependence for random variables. Ann Statist
9:879-885
THANK YOU!