IDEAS home Printed from https://ideas.repec.org/a/oup/jfinec/v20y2022i1p45-75..html
   My bibliography  Save this article

Model and Moment Selection in Factor Copula Models
[Extensions to the Gaussian Copula: Random Recovery and Random Factor Loadings]

Author

Listed:
  • Fang Duan
  • Hans Manner
  • Dominik Wied

Abstract

This article develops a simultaneous model and moment selection procedure for factor copula models. Since the density of the factor copula is generally not known in closed form, widely used likelihood or moment-based model selection criteria cannot be directly applied on factor copulas. The new approach is inspired by the methods for generalized methods of moments proposed by Andrews (1999) and Andrews and Lu (2001). The consistency of the procedure is proved and Monte Carlo simulations show its good performance in finite samples in different scenarios of sample sizes and dimensions. The impact of the choice of moments in selected regions of the support on model selection and value-at-risk prediction is further examined by simulation and an application to a portfolio consisting of ten stocks in the Deutscher Aktienindex (DAX30) index.

Suggested Citation

  • Fang Duan & Hans Manner & Dominik Wied, 2022. "Model and Moment Selection in Factor Copula Models [Extensions to the Gaussian Copula: Random Recovery and Random Factor Loadings]," Journal of Financial Econometrics, Oxford University Press, vol. 20(1), pages 45-75.
    • Handle: RePEc:oup:jfinec:v:20:y:2022:i:1:p:45-75.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jjfinec/nbz039
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. K. B. Gubbels & J. Y. Ypma & C. W. Oosterlee, 2023. "Principal Component Copulas for Capital Modelling," Papers 2312.13195, arXiv.org.

    More about this item

    Keywords

    factor copula model; model selection; moment selection; value-at-risk;
    All these keywords.

    JEL classification:

    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jfinec:v:20:y:2022:i:1:p:45-75.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sofieea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.