Model distances for vine copulas in high dimensions (1510.03671v2)

Abstract: Vine copulas are a flexible class of dependence models consisting of bivariate building blocks and have proven to be particularly useful in high dimensions. Classical model distance measures require multivariate integration and thus suffer from the curse of dimensionality. In this paper we provide numerically tractable methods to measure the distance between two vine copulas even in high dimensions. For this purpose, we consecutively develop three new distance measures based on the Kullback-Leibler distance, using the result that it can be expressed as the sum over expectations of KL distances between univariate conditional densities, which can be easily obtained for vine copulas. To reduce numerical calculations we approximate these expectations on adequately designed grids, outperforming Monte Carlo-integration with respect to computational time. In numerous examples and applications we illustrate the strengths and weaknesses of the developed distance measures.