Estimation and Model Selection of Copulas with an Application to Exchange Rates

Copulas are the part of a multivariate distribution function that fully captures the cross sectional dependence between the variables of interest and they have become a very popular tool to model dependencies different from the linear correlation of elliptical distributions. We review the theory of copula functions, present a number of examples and describe how to sample random data from these. Different techniques for estimation and model selection are discussed and compared in an extensive Monte Carlo study. We find that a test not considered in the literature, namely the Jarque-Bera test applied on transformed data from the conditional copula, has the best properties of the presented tests, but that the most reliable criterion for selecting the best fitting copula is the Akaike information criterion. We model exchange rate returns of Latin American currencies against the euro with copulas and we find evidence of symmetric dependence, excess upper tail dependence and excess lower tail dependence.econometrics;

Tails of correlation mixtures of elliptical copulas

Correlation mixtures of elliptical copulas arise when the correlation parameter is driven itself by a latent random process. For such copulas, both penultimate and asymptotic tail dependence are much larger than for ordinary elliptical copulas with the same unconditional correlation. Furthermore, for Gaussian and Student t-copulas, tail dependence at sub-asymptotic levels is generally larger than in the limit, which can have serious consequences for estimation and evaluation of extreme risk. Finally, although correlation mixtures of Gaussian copulas inherit the property of asymptotic independence, at the same time they fall in the newly defined category of near asymptotic dependence. The consequences of these findings for modeling are assessed by means of a simulation study and a case study involving financial time series.Comment: 21 pages, 3 figure

TROUBLE 3: A fault diagnostic expert system for Space Station Freedom's power system

Designing Space Station Freedom has given NASA many opportunities to develop expert systems that automate onboard operations of space based systems. One such development, TROUBLE 3, an expert system that was designed to automate the fault diagnostics of Space Station Freedom's electric power system is described. TROUBLE 3's design is complicated by the fact that Space Station Freedom's power system is evolving and changing. TROUBLE 3 has to be made flexible enough to handle changes with minimal changes to the program. Three types of expert systems were studied: rule-based, set-covering, and model-based. A set-covering approach was selected for TROUBLE 3 because if offered the needed flexibility that was missing from the other approaches. With this flexibility, TROUBLE 3 is not limited to Space Station Freedom applications, it can easily be adapted to handle any diagnostic system

On the causes of car accidents on German Autobahn connectors

The work at hand tries to identify factors that explain accidents on German Autobahn connectors. To find these factors the empirical study makes use of count data models. The findings are based on a set of 197 ramps, which we classified into three distinct types of ramps. For these ramps accident data was available for a period of 3 years (January 2003 until December 2005). The Negative Binomial model proved to be an appropriate model for our cross-sectional setting in detecting factors that cause accidents. The heterogeneity in our dataset forced us to investigate the three different types of ramps separately. By comparing results of the aggregated model and results of the ramp-specific models ramp-type-independent as well as ramp-type-specific factors were identified. The most significant variable in all models was a measure of the average daily traffic. For geometric variables not only continuous effects were found to be significant but also threshold effects. --highway connectors,German Autobahn,accident causes,Poisson regression,Negative Binomial regression

Testing for Asset Market Linkages: A new Approach based on Time-Varying Copulas

This paper proposes a new approach based on time-varying copulas to test for the presence of increases in stock market interdependence after financial crises, also known as shift-contagion process. We show that the previous approaches that take into account changes in volatility regimes are biased when the DGP is either copula based or when there is a break in variance significantly different from the one in correlation. A sequential algorithm is then elaborated to remove this bias. Applied to the recent 1997 Asian crisis, it confirms that breaks in variances always precede those in conditional correlation. It also turns out that this financial turmoil has been characterized by shift-contagion.financial economics and financial management ;

Forecasting international stock market correlations: does anything beat a CCC?

It is well known that the correlation between financial series varies over time. Here, the forecasting performance of different time-varying correlation models is compared for cross-country correlations of weekly G5 and daily European stock market indices. In contrast to previous studies only the correlation and not the entire covariance matrix is forecasted and multi-step forecasts are considered. The forecast comparison is done by considering statistical and economic criteria. The results suggest that under a statistical criterion time-varying correlation models perform quite well for weekly data, but cannot outperform the constant correlation model for daily data. Considering economic criteria it is hard to beat a constant correlation model. --dynamic conditional correlation,regime switching,stochastic correlation,smooth correlations,indirect model comparison,portfolio construction

Dynamic stochastic copula models: Estimation, inference and applications

We propose a new dynamic copula model where the parameter characterizing dependence follows an autoregressive process. As this model class includes the Gaussian copula with stochastic correlation process, it can be viewed as a generalization of multivariate stochastic volatility models. Despite the complexity of the model, the decoupling of marginals and dependence parameters facilitates estimation. We propose estimation in two steps, where first the parameters of the marginal distributions are estimated, and then those of the copula. Parameters of the latent processes (volatilities and dependence) are estimated using efficient importance sampling (EIS). We discuss goodness-of-fit tests and ways to forecast the dependence parameter. For two bivariate stock index series, we show that theproposed model outperforms standard competing models.econometrics;

Teemu-ohra

Nimekkeen selvennys: Ohra Jo 1062.VokKirjasto Aj-

Lämpöpumppujärjestelmien sähköasennukset

Opinnäytetyö on tehty Senera Oy:lle. Senera Oy on yksi Suomen suurimpia lämpöpumppujärjestelmiä urakoiva yritys. Lämpöpumppujärjestelmien määrä Suomessa kasvaa jatkuvasti ja niiden rooli rakennusten lämmityslaitteina kasvaa jatkuvasti. Lämpöpumpun lämmitystehosta noin yksi kolmasosa muodostuu sähkötehosta. Tämän vuoksi sähkön käyttö ja sähköasennukset muodostava merkittävän kokonaisuuden lämpöpumppujärjestelmissä. Opinnäytetyön tarkoitus on kuvata lämpöpumpun toimintaperiaate, lämpöpumppu sähkölaitteena sekä lämpöpumppujärjestelmän sähköasennustöitä. Lisäksi käsitellään erilaisia menetelmiä mitata ja säätää lämpöpumppujärjestelmän sähkötehon kulutusta sekä loistehon kulutuksen vähentämistä lämpöpumppujärjestelmissä. Lämpöpumppujärjestelmän loistehon kompensoinnin taloudellista kannattavuutta arvioitiin käyttämällä esimerkkinä Hämeenlinnassa olevaa asuinkerrostalon lämpöpumppujärjestelmää. Loistehon kompensoinnin kannattavuutta tarkasteltiin nettonykyarvomenetelmällä. Esimerkkinä lämpöpumppujärjestelmän sähköasennustöistä esiteltiin Etelä-Suomessa Kaarinassa sijaitsevaan kerrostaloon asennetun lämpöpumppujärjestelmän sähköasennustyöt. Opinnäytetyön perusteella lämpöpumppujärjestelmän kuluttaman loistehon kompensointi on taloudellisesti kannattavaa. Asennettaessa lämpöpumppujärjestelmää olemassa olevaan rakennukseen toisen lämmitysjärjestelmän tilalle on erityisen tärkeää tehdä ennen lämpöpumppujärjestelmän sähköasennustöitä huolellinen kartoitus. Kartoituksen perusteella varmistetaan sähköasennustöiden onnistuminen ja lämpöpumppujärjestelmän hyvä toiminta.This thesis was done to Senera Oy which is one of the biggest heat pump installation companies in Finland. Senera Oy installs mainly ground / rock heat pump systems. Heat pumps play more and more significant role as heating system in Finnish buildings. The amount of heat pumps is increasing strongly. Approximately one third of heating power of heat pump consist of electric power. Because of this electric power and electric installations play significant role in heat pump systems. The purpose of this study was to introduce the working principle of heat pump, heat pump as electric device, electric installation of heat pumps systems and methods to measure and control electric power consumption of heat pump systems. In addition, reactive power reduction was investigated from economic the point of view. Economic profitability of reactive power reduction is introduced in this thesis by using as an example installed heat pump system in Hämeenlinna town in southern Finland. The economical profitability was calculated by using net present value -method. As an example of electric installations of a heat pump system was system which was installed in 2016 to apartment building in southern Finland in Kaarina town. Based on this thesis, reduction of reactive power in heat pump system seems to be very profitable from the economic point of view. When heat pump systems replace some other heating system in apartment houses, it is very important to make careful survey of the existing electric features. This ensures that the electric installations will succeed and heat pump systems will run well