Lévy-frailty copulas

Jan-Frederik Mai and Matthias Scherer

Journal of Multivariate Analysis, 2009, vol. 100, issue 7, 1567-1585

Abstract: A parametric family of n-dimensional extreme-value copulas of Marshall-Olkin type is introduced. Members of this class arise as survival copulas in Lévy-frailty models. The underlying probabilistic construction introduces dependence to initially independent exponential random variables by means of first-passage times of a Lévy subordinator. Jumps of the subordinator correspond to a singular component of the copula. Additionally, a characterization of completely monotone sequences via the introduced family of copulas is derived. An alternative characterization is given by Hausdorff's moment problem in terms of random variables with compact support. The resulting correspondence between random variables, Lévy subordinators, and copulas is studied and illustrated with several examples. Finally, it is used to provide a general methodology for sampling the copula in many cases. The new class is shown to share some properties with Archimedean copulas regarding construction and analytical form. Finally, the parametric form allows us to compute different measures of dependence and the Pickands representation.

Keywords: Extreme-value; copula; Marshall-Olkin; copula; Archimedean; copula; Completely; monotone; sequence; Lévy; subordinator (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (16)

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