Publication date: Available online 31 August 2017
Source:Insurance: Mathematics and Economics
Author(s): Nan Guo, Fang Wang, Jingping Yang
The composite Bernstein copula (CBC) (Yang et al., 2015) is a copula function generated from a composition of two copulas. This paper first shows that some well-known copulas belong to the CBC family with desirable properties. An EM algorithm for estimating the CBC is proposed, and it is applied for a real data set to show the fitting result of the CBC in modeling dependence. The probabilistic structure for the CBC family is presented, which is useful for generating random numbers from the CBC. Finally, the probabilistic structure of the CBC is applied to credit risk analysis of collateralized debt obligations to show its advantage in empirical analysis.
Source:Insurance: Mathematics and Economics
Author(s): Nan Guo, Fang Wang, Jingping Yang