RVineMLE: Maximum likelihood estimation of an R-vine copula model

Description

This function calculates the maxiumum likelihood estimate (MLE) of the R-vine copula model parameters using sequential estimates as initial values (if not provided).

Usage

RVineMLE(data, RVM, start=RVM$par, start2=RVM$par2, maxit=200, max.df=30,
         max.BB=list(BB1=c(5,6),BB6=c(6,6),BB7=c(5,6),BB8=c(6,1)),
         grad=FALSE, hessian=FALSE, se=FALSE, ...)

Arguments

data

An N x d data matrix (with uniform margins).

RVM

An RVineMatrix object including the structure and the pair-copula families and parameters (if known).

start

Lower triangular d x d matrix with zero diagonal entries with starting values for the pair-copula parameters (optional; otherwise they are calculated via RVineSeqEst; default: start = RVM$pa

start2

Lower triangular d x d matrix with zero diagonal entries with starting values for the second parameters of pair-copula families with two parameters (optional; otherwise they are calculated via RVineSeqEst

maxit

The maximum number of iteration steps (optional; default: maxit = 500).

max.df

Numeric; upper bound for the estimation of the degrees of freedom parameter of the t-copula (default: max.df = 30; for more details see BiCopEst).

max.BB

List; upper bounds for the estimation of the two parameters (in absolute values) of the BB1, BB6, BB7 and BB8 copulas (default: max.BB = list(BB1=c(5,6),BB6=c(6,6),BB7=c(5,6),BB8=c(6,1))).

grad

If RVM$family only contains one parameter copula families or the t-copula the analytical gradient can be used for maximization of the log-likelihood (see RVineGrad; default: grad = FALSE).

hessian

Logical; whether the Hessian matrix of parameter estimates is estimated (default: hessian = FALSE). Note that this is not the Hessian Matrix calculated via RVineHessian but via finite diff

Logical; whether standard errors of parameter estimates are estimated on the basis of the Hessian matrix (see above; default: se = FALSE).

...

Further arguments for optim (e.g. factr controls the convergence of the "L-BFGS-B" method, or trace, a non-negative integer, determines if tracing information on the progress of the optimization is produced.) For

Value

RVMRVineMatrix object with the calculated parameters stored in RVM$par and RVM$par2.
valueOptimized log-likelihood value corresponding to the estimated pair-copula parameters.
convergenceAn integer code indicating either successful convergence (convergence = 0) or an error: 1 = the iteration limit maxit has been reached 51 = a warning from the "L-BFGS-B" method; see component message for further details 52 = an error from the "L-BFGS-B" method; see component message for further details
messageA character string giving any additional information returned by optim, or NULL.
countsA two-element integer vector giving the number of calls to fn and gr respectively. This excludes those calls needed to compute the Hessian, if requested, and any calls to fn to compute a finite-difference approximation to the gradient.
hessianIf hessian = TRUE, the Hessian matrix is returned. Its calculation is on the basis of finite differences (output of optim).
seIf se = TRUE, the standard errors of parameter estimates are returned. Their calculation is based on the Hesse matrix (see above).

References

Dissmann, J. F., E. C. Brechmann, C. Czado, and D. Kurowicka (2013). Selecting and estimating regular vine copulae and application to financial returns. Computational Statistics & Data Analysis, 59 (1), 52-69. Stoeber, J. and U. Schepsmeier (2013). Estimating standard errors in regular vine copula models. Computational Statistics, 1-29 http://link.springer.com/article/10.1007/s00180-013-0423-8#.

Examples

Run this code

# define 5-dimensional R-vine tree structure matrix
Matrix = c(5,2,3,1,4,0,2,3,4,1,0,0,3,4,1,0,0,0,4,1,0,0,0,0,1)
Matrix = matrix(Matrix,5,5)

# define R-vine pair-copula family matrix
family = c(0,1,3,4,4,0,0,3,4,1,0,0,0,4,1,0,0,0,0,3,0,0,0,0,0)
family = matrix(family,5,5)

# define R-vine pair-copula parameter matrix
par = c(0,0.2,0.9,1.5,3.9,0,0,1.1,1.6,0.9,0,0,0,1.9,0.5,
        0,0,0,0,4.8,0,0,0,0,0)
par = matrix(par,5,5)

# define second R-vine pair-copula parameter matrix
par2 = matrix(0,5,5)

# define RVineMatrix object
RVM = RVineMatrix(Matrix=Matrix,family=family,par=par,par2=par2,
                  names=c("V1","V2","V3","V4","V5"))

# simulate a sample of size 300 from the R-vine copula model
simdata = RVineSim(300,RVM)

# compute the MLE
mle = RVineMLE(simdata,RVM,grad=TRUE)
mle$RVM

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