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    Question about copula-GARCH models




    Hello everyone,

    I am learning about copulas and also do some MATLAB coding to get better understanding of how copulas work.
    Recently I have started coding simple copula-GARCH models, that is I fit say AR(1)-GARCH(1,1)-normal models to univariate time series, and then I want to fit the copula (two-stage procedure).

    What I have problem with is connecting these two estimation stages. After I have estimated AR-GARCH univariate models, what do I take from these models and put into log-likelihood estimation of the copula? Do I take residuals from AR-GARCH models, or do I use estimated parameters of these models to produce samples that I then use in copula estimation stage?

    I read a few papers that use copula-GARCH models, but it is not clear from them how to estimate copula model. One paper stated that after AR-GARCH univariate model is estimated, I get parameters THETA(x), where x is the time series used in estimation. And then I should estimate F(x, THETA(x)), that is cdf.
    I still do not get it.
    Probably very simple and obvious thing, but I just do not get it.
    Could you please help me understand? How do I do it in MATLAB or R?

    THanks in advance!
    /Sergey

  2. #2
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    Maybe the topic is a bit too advanced for this forum.
    Anyway, I found the answer.

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    Indeed it's a highly specialized topic you're referrring to. Maybe a quants forum would be more appropriate.

  4. #4
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    Quote Originally Posted by mp83 View Post
    Indeed it's a highly specialized topic you're referrring to. Maybe a quants forum would be more appropriate.
    Yes, you are right.
    I found the answer myself, so it is OK.

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