Tuesday, 29 March 2016

How to fit a copula model in R [heavily revised]. Part 2: fitting the copula

Here I am again with part 2. If you would like to read part 1 of this short tutorial on copulas, please click here.

In this second post I am going to select a copula model, fit it to a test dataset, evaluate the fitting and generate random observations from the fitted multivariate distribution. Furthermore I am going to show how to measure correlation using Spearman's Rho and Kendall's Tau. In order to run the code in this post you need the following packages: copula and VineCopula.

The dataset

For this example I am going to use a test dataset. You can download it from this link. This test dataset contains two variables, x and y, characterized by a strong left tail correlation.

By visually inspecting the plot of x versus y you can easily notice that low values of x tends to be highly correlated with low values of y.


Sunday, 13 March 2016

How to fit a copula model in R [heavily revised]. Part 1: basic tools

More than a year ago I wrote a short post on how to fit a copula model in R. The post showed how to make a very raw and basic fitting of a test dataset to a two dimensional normal copula (or a gaussian copula if you wish) using the copula package. The content of the post was not much, but that was a big part of what I knew about how to use copulas in R at that time and there was not much documentation available other than the official copula package documentation which is quite technical in my opinion (as it should be) and may not be that easy for a beginner copula user.