### Abstract

A new way of choosing a suitable copula to model dependence is introduced. Instead of relying on a given parametric family of copulas or applying the other extreme of modeling dependence in a nonparametric way, an intermediate approach is proposed, based on a sequence of parametric models containing more and more dependency aspects. In contrast to a similar way of thinking in testing theory, the method here, intended for estimating the copula, often requires a somewhat larger number of steps. One approach is based on exponential families, another on contamination families. An extensive numerical investigation is supplied on a large number of well known copulas. The method based on contamination families is recommended. A Gaussian start in this approximation looks very promising.

Original language | Undefined |
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Place of Publication | Enschede |

Publisher | Toegepaste Wiskunde |

Number of pages | 28 |

Publication status | Published - Aug 2006 |

### Publication series

Name | Applied Mathematics Memoranda |
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Publisher | Department of Applied Mathematics, University of Twente |

No. | 1809 |

ISSN (Print) | 0169-2690 |

### Keywords

- EWI-6117
- MSC-62H12
- IR-66193
- METIS-238081
- MSC-62P05
- MSC-62H20

## Cite this

Kallenberg, W. C. M. (2006).

*Modeling dependence*. (Applied Mathematics Memoranda; No. 1809). Enschede: Toegepaste Wiskunde.