Abstract

http://ssrn.com/abstract=2012497
 
 

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Dynamic Copulas and Long Range Dependence


Beatriz V.M. Mendes


Instituto Nacional de Matemática Pura e Aplicada

Silvia Regina Costa Lopes


University of Sao Paulo (USP) - Institute of Mathematics and Statistics (IME)

October 1, 2011

Frontiers in Finance and Economics, Vol. 8, No. 2, pp. 89-111, 2011

Abstract:     
This paper extends the evolution equation of Patton (2006) for the time variation of the copula parameters by specifying an autoregressive fractionally integrated term. For any copula parameter there is a suitable one-to-one transformation so that the maximum likelihood estimation method may be employed. It is suggested an exploratory tool based on the copula data cross products for detecting the presence of long range dependence on the copula level of real data. We simulate from copula models possessing long range dependence and work out two examples using real data. Modeling long range dependence on the level of dynamic copulas has the potential for providing improved forecasts and are useful for financial and economic applications.

Number of Pages in PDF File: 23

Keywords: Long Memory, Conditional Copulas, Time Series, Financial

JEL Classification: C22, C51, G10

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Date posted: February 29, 2012  

Suggested Citation

Mendes, Beatriz V.M. and Costa Lopes, Silvia Regina, Dynamic Copulas and Long Range Dependence (October 1, 2011). Frontiers in Finance and Economics, Vol. 8, No. 2, pp. 89-111, 2011. Available at SSRN: http://ssrn.com/abstract=2012497

Contact Information

Beatriz V.M. Mendes (Contact Author)
Instituto Nacional de Matemática Pura e Aplicada ( email )
Ejercito de los Andes 950
Rio de Janeiro, 20271-201
Brazil
Silvia Regina Costa Lopes
University of Sao Paulo (USP) - Institute of Mathematics and Statistics (IME)
Sao Paulo
Brazil
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