Pair-copula constructions for financial applications: A review


  • Journal: Econometrics, vol. 4, p. 15, 2016
  • Utgiver: MDPI
  • Internasjonale standardnumre:
    • Trykt: 2225-1146
    • Elektronisk: 2225-1146
  • Lenke:

This survey reviews the large and growing literature on the use of pair-copula constructions (PCCs) in financial applications. Using a PCC, multivariate data that exhibit complex patterns of dependence can be modeled using bivariate copulae as simple building blocks. Hence, this model represents a very flexible way of constructing higher-dimensional copulae. In this paper, we survey inference methods and goodness-of-fit tests for such models, as well as empirical applications of the PCCs in finance and economics.