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Copula density estimation by total variation penalized likelihood with linear equality constraints

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  • Qu, Leming
  • Yin, Wotao

Abstract

A copula density is the joint probability density function (PDF) of a random vector with uniform marginals. An approach to bivariate copula density estimation is introduced that is based on maximum penalized likelihood estimation (MPLE) with a total variation (TV) penalty term. The marginal unity and symmetry constraints for copula density are enforced by linear equality constraints. The TV-MPLE subject to linear equality constraints is solved by an augmented Lagrangian and operator-splitting algorithm. It offers an order of magnitude improvement in computational efficiency over another TV-MPLE method without constraints solved by the log-barrier method for the second order cone program. A data-driven selection of the regularization parameter is through K-fold cross-validation (CV). Simulation and real data application show the effectiveness of the proposed approach. The MATLAB code implementing the methodology is available online.

Suggested Citation

  • Qu, Leming & Yin, Wotao, 2012. "Copula density estimation by total variation penalized likelihood with linear equality constraints," Computational Statistics & Data Analysis, Elsevier, vol. 56(2), pages 384-398.
    • Handle: RePEc:eee:csdana:v:56:y:2012:i:2:p:384-398
    DOI: 10.1016/j.csda.2011.07.016
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    Cited by:

    1. Göran Kauermann & Christian Schellhase & David Ruppert, 2013. "Flexible Copula Density Estimation with Penalized Hierarchical B-splines," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 40(4), pages 685-705, December.
    2. repec:hal:wpaper:hal-00834000 is not listed on IDEAS
    3. Bak, Kwan-Young & Jhong, Jae-Hwan & Lee, JungJun & Shin, Jae-Kyung & Koo, Ja-Yong, 2021. "Penalized logspline density estimation using total variation penalty," Computational Statistics & Data Analysis, Elsevier, vol. 153(C).
    4. Di Bernardino Elena & Rullière Didier, 2013. "On certain transformations of Archimedean copulas: Application to the non-parametric estimation of their generators," Dependence Modeling, De Gruyter, vol. 1(2013), pages 1-36, October.
    5. Eddie Anderson & Artem Prokhorov & Yajing Zhu, 2020. "A Simple Estimator of Two‐Dimensional Copulas, with Applications," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(6), pages 1375-1412, December.
    6. Gery Geenens & Arthur Charpentier & Davy Paindaveine, 2014. "Probit Transformation for Nonparametric Kernel Estimation of the Copula Density," Working Papers ECARES ECARES 2014-23, ULB -- Universite Libre de Bruxelles.
    7. Elena Di Bernardino & Clémentine Prieur, 2014. "Estimation of multivariate conditional-tail-expectation using Kendall's process," Journal of Nonparametric Statistics, Taylor & Francis Journals, vol. 26(2), pages 241-267, June.
    8. Pengfei Wei & Zhenzhou Lu & Jingwen Song, 2014. "Moment‐Independent Sensitivity Analysis Using Copula," Risk Analysis, John Wiley & Sons, vol. 34(2), pages 210-222, February.

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