Copula Processes

Details Copula Processes Copula Processes

2010-06-07

arxiv.org/abs/1006.1350v2

Statistics

Methodology

11 pages, 1 table, 1 figure. Submitted for publication. Since last version: minor edits and reformatting

Scientific paper

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.

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