Alexander McNeil (Heriot-Watt University)

A new perspective on Archimedean copulas
Wednesday 15 October 2008 at 15.30, JCMB 6206

Abstract

The Archimedean copula family is used in a number of actuarial and financial applications, ranging from the construction of multivariate loss distributions, frailty models for dependent lifetimes, and models of credit default risk. We present some new results that contribute to a greater understanding of this family and point the way to improved simulation and estimation procedures. We derive necessary and sufficient conditions for an Archimedean generator function (a continuous, decreasing mapping of the positive half-line to the unit interval) to generate a copula in a given dimension d. We also show how the Archimedean family coincides with the class of survival copulas of L1-norm symmetric distributions. These results allow us to construct a rich variety of new Archimedean copulas in different dimensions and to solve in principle the problem of generating samples from any Archimedean copula.

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