Abstract

The choice of a copula model from limited data is a hard but important task. Motivated by the visual patterns that different copula models produce in smoothed density heatmaps, we consider copula model selection as an image recognition problem. We extract image features from heatmaps using the pre-trained AlexNet, and present workflows for model selection that combine image features with statistical information. We employ dimension reduction via Principal Component and Linear Discriminant Analyses, and use a Support Vector Machine classifier. Simulation studies show that the use of image data improves the accuracy of the copula model selection task, particularly in scenarios where sample sizes and correlations are low. This finding indicates that transfer learning can support statistical procedures of model selection. We demonstrate application of the proposed approach to the joint modelling of weekly returns of the MSCI and RISX indices.

Publication Type:	Article
Additional Information:	This article has been accepted for publication in ASTIN Bulletin by Cambridge University Press. This version is free to view and download for private research and study only. Not for re-distribution or re-use. © CUP
Publisher Keywords:	copula, dependence modelling, image recognition, model selection, classification, transfer learning
Subjects:	H Social Sciences > HG Finance Q Science > QA Mathematics
Departments:	Bayes Business School > Actuarial Science & Insurance

Preview

Text - Accepted Version Download (4MB) | Preview

Export

Downloads