Linear B-spline copulas with applications to nonparametric estimation of copulas

Authors:
Xiaojing Shen;Yunmin Zhu;Lixin Song
Affiliations:
Department of Mathematics/Key Lab of Fundamental Science for National Defense, Sichuan University, Chengdu, 610064, PR China;Department of Mathematics/Key Lab of Fundamental Science for National Defense, Sichuan University, Chengdu, 610064, PR China;Department of Applied Mathematics, Dalian University of Technology, Dalian, 116024, PR China
Venue:
Computational Statistics & Data Analysis
Year:
2008

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Abstract

In this paper, we propose a method for constructing a new class of copulas. They are called linear B-spline copulas which are a good approximation of a given complicated copula by using finite numbers of values of this copula without the loss of some essential properties. Moreover, rigorous analysis shows that the empirical linear B-spline copulas are more effective than empirical copulas to estimate perfectly dependent copulas. For the cases of nonperfectly dependent copulas, simulations show that the empirical linear B-spline copulas also improve the empirical copulas to estimate the underlying copula structure. Furthermore, we compare the performance of parametric estimation of copulas based on the empirical copulas with that based on the empirical linear B-spline copulas by simulations. In most of the cases, the latter are better than the former.