A0400
Title: Bayesian nonparametric inference for conditional vine copulas
Authors: Luciana Dalla Valle - University of Plymouth (United Kingdom) [presenting]
Rosario Barone - University of Rome Tor Vergata (Italy)
Abstract: In recent years, conditional copulas, that allow dependence between variables to vary according to the values of one or more covariates, have attracted increasing attention. However, the literature mainly focused on the bivariate case, since the constraints on the multivariate copulas correlation matrices would make the specifications of covariates arduous. In high dimension, vine copulas offer greater flexibility compared to multivariate copulas, since they are constructed using bivariate copulas as building blocks. We present a novel inferential approach for multivariate distributions, which combines the flexibility of vine constructions with the advantages of Bayesian nonparametrics, not requiring the specification of parametric families for each pair copula. Expressing multivariate copulas using vines allows us to easily account for covariate specifications driving the dependence between response variables. We specify the vine copula density as an infinite mixture of Gaussian copulas, defining a Dirichlet process prior on the mixing measure, and performing posterior inference via Markov chain Monte Carlo sampling. Our approach is successful for clustering as well as for density estimation. We carry out simulation studies and apply the proposed approach to analyse a veterinary dataset and investigate the impact of natural disasters on financial development.
