Pair-Copula Constructions for Financial Applications: A Review
This survey reviews the large and growing literature on the use of pair-copula constructions (PCCs) in financial applications. Using a PCC, multivariate data that exhibit complex patterns of dependence can be modeled using bivariate copulae as simple building blocks. Hence, this model represents a v...
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| Format: | Article |
| Language: | English |
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MDPI AG
2016-10-01
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| Series: | Econometrics |
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| Online Access: | http://www.mdpi.com/2225-1146/4/4/43 |
| Summary: | This survey reviews the large and growing literature on the use of pair-copula constructions (PCCs) in financial applications. Using a PCC, multivariate data that exhibit complex patterns of dependence can be modeled using bivariate copulae as simple building blocks. Hence, this model represents a very flexible way of constructing higher-dimensional copulae. In this paper, we survey inference methods and goodness-of-fit tests for such models, as well as empirical applications of the PCCs in finance and economics. |
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| ISSN: | 2225-1146 |