Understanding the dynamics of a high dimensional non-normal dependency structure is a challenging task. This research aims at attacking this problem by building up a hidden Markov model (HMM) for Hierarchical Archimedean Copulae (HAC). The HAC constitute a wide class of models for high dimensional dependencies, and HMM is a statistical technique for describing time varying dynamics. HMM applied to HAC flexibly models high dimensional non-Gaussian time series. Consistency results for both parameters and HAC structures are established in an HMM framework. The model is calibrated to exchange rate data with a VaR application, and the model's performance is compared to other dynamic models. © 2013 Springer-Verlag.
CITATION STYLE
Wang, W., Okhrin, O., & Härdle, W. K. (2013). HMM and HAC. In Advances in Intelligent Systems and Computing (Vol. 190 AISC, pp. 341–348). Springer Verlag. https://doi.org/10.1007/978-3-642-33042-1_37
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