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A goodness-of-fit test for copulas based on the collision test

Author

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  • Yiran Chen

    (Florida State University)

  • Giray Ökten

    (Florida State University)

Abstract

We propose a new goodness-of-fit test for copulas using the collision test for pseudorandom number generators and Voronoi diagrams generated by low-discrepancy sequences. We provide an error bound for numerical integration that involves number of collisions when the unit cube is partitioned via Voronoi cells, and present an example from option pricing. We investigate the accuracy of the goodness-of-fit test numerically, and compare it with three tests in the literature. The numerical results suggest the new test excels in computationally demanding scenarios when the sample size is large or computing the copula is expensive, and provides sufficient accuracy in computing times that are faster by factors of thousands than the tests with comparable accuracy.

Suggested Citation

  • Yiran Chen & Giray Ökten, 2022. "A goodness-of-fit test for copulas based on the collision test," Statistical Papers, Springer, vol. 63(5), pages 1369-1385, October.
    • Handle: RePEc:spr:stpapr:v:63:y:2022:i:5:d:10.1007_s00362-021-01277-6
    DOI: 10.1007/s00362-021-01277-6
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    References listed on IDEAS

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    6. Genest, Christian & Rémillard, Bruno & Beaudoin, David, 2009. "Goodness-of-fit tests for copulas: A review and a power study," Insurance: Mathematics and Economics, Elsevier, vol. 44(2), pages 199-213, April.
    7. Leong, Philip H. W. & Zhang, Ganglie & Lee, Dong-U & Luk, Wayne & Villasenor, John, 2005. "A Comment on the Implementation of the Ziggurat Method," Journal of Statistical Software, Foundation for Open Access Statistics, vol. 12(i07).
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