q-fin updates on arXiv.org
Thu, 23 May 2019 04:00:06 GMT language
In this paper we discuss a natural extension of infinite discrete
partition-of-unity copulas which were recently introduced in the literature to
continuous partition of copulas with possible applications in risk management
and other fields. We present a general simple algorithm to generate such
copulas on the basis of the empirical copula from high-dimensional data sets.
In particular, our constructions also allow for an implementation of positive
tail dependence which sometimes is a desirable property of copula modelling, in
particular for internal models under Solvency II.