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A Bayesian semiparametric Archimedean copula

Abstract

An Archimedean copula is characterised by its generator. This is a real function whose inverse behaves as a survival function. We propose a semiparametric generator based on a quadratic spline. This is achieved by modelling the first derivative of a hazard rate function, in a survival analysis context, as a piecewise constant function. Convexity of our semiparametric generator is obtained by imposing some simple constraints. The induced semiparametric Archimedean copula produces Kendall's tau association measure that covers the whole range (1,1)(-1,1). Inference on the model is done under a Bayesian approach and for some prior specifications we are able to perform an independence test. Properties of the model are illustrated with a simulation study as well as with a real dataset.

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