Copula Processes

Andrew Gordon Wilson and Zoubin Ghahramani

Papers from arXiv.org

Abstract: We define a copula process which describes the dependencies between arbitrarily many random variables independently of their marginal distributions. As an example, we develop a stochastic volatility model, Gaussian Copula Process Volatility (GCPV), to predict the latent standard deviations of a sequence of random variables. To make predictions we use Bayesian inference, with the Laplace approximation, and with Markov chain Monte Carlo as an alternative. We find both methods comparable. We also find our model can outperform GARCH on simulated and financial data. And unlike GARCH, GCPV can easily handle missing data, incorporate covariates other than time, and model a rich class of covariance structures.

Date: 2010-06, Revised 2010-06
New Economics Papers: this item is included in nep-ecm
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1006.1350

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