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| Title | : | Determining the optimal window length of the time-varying copula parameter: a simulation study |
| Author | : |
ATINA AHDIKA (1) Prof. Dr.rer.nat. Dedi Rosadi, S.Si., M.Sc. (2) Dr. Adhitya Ronnie Effendie, S.Si., M.Si., M.Sc. (3) Dr. Drs. Gunardi, M.Si. (4) |
| Date | : | 24 2020 |
| Keyword | : | time-varying copula time-varying copula |
| Abstract | : | A time-varying copula is a multivariate cumulative distribution function that can accommodate the temporal dependence of random variables. To capture the temporal dependence of random variables using a copula, we can form a time variation on copula parameters. Some studies reported that a function of a latent variable following an autoregressive process defines time-varying copula parameters. The process consists of an autoregressive coefficient describing the influence of the parameters in previous times and a forcing variable representing the relationship between the marginal variables which utilize previous information over a certain number of window lengths of the observations. Previous studies reported that ARMA(1,10) defines time-varying copula parameters. However, the optimal parameters of time-varying copulas do not always require ten last observations. Therefore, we determine the optimal window length of the time-varying copula parameter by conducting a numerical simulation on four types of copula with different strengths and directions of dependence. The window length is defined as a new parameter and the optimal parameters can be obtained by finding the values producing the smallest AIC. We also provide a numerical simulation on how to improve the accuracy of the predicted series by changing the mean and standard deviation of the residual pairs. |
| Group of Knowledge | : | |
| Level | : | Internasional |
| Status | : |
Published
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24_Determining the optimal window length of the timevarying copula parameter a simulation study.pdf
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