# emle: Maximum Likelihood Estimators for (Nested) Archimedean... In copula: Multivariate Dependence with Copulas

 emle R Documentation

## Maximum Likelihood Estimators for (Nested) Archimedean Copulas

### Description

Compute (simulated) maximum likelihood estimators for (nested) Archimedean copulas.

### Usage

```emle(u, cop, n.MC=0, optimizer="optimize", method,
interval=initOpt(cop@copula@name),
start=list(theta=initOpt(cop@copula@name, interval=FALSE, u=u)),
...)
.emle(u, cop, n.MC=0,
interval=initOpt(cop@copula@name), ...)
```

### Arguments

 `u` n x d-matrix of (pseudo-)observations (each value in [0,1]) from the copula, with n the sample size and d the dimension. `cop` `outer_nacopula` to be estimated (currently only non-nested, that is, Archimedean copulas are admitted). `n.MC` `integer`, if positive, simulated maximum likelihood estimation (SMLE) is used with sample size equal to `n.MC`; otherwise (`n.MC=0`), MLE. In SMLE, the dth generator derivative and thus the copula density is evaluated via (Monte Carlo) simulation, whereas MLE uses the explicit formulas for the generator derivatives; see the details below. `optimizer` a string or `NULL`, indicating the optimizer to be used, where `NULL` means to use `optim` via the standard R function `mle()` from (base R) package stats4, whereas the default, `"optimize"` uses `optimize` via the R function `mle2()` from package bbmle. `method` only when `optimizer` is `NULL` or `"optim"`, the method to be used for `optim`. `interval` bivariate vector denoting the interval where optimization takes place. The default is computed as described in Hofert et al. (2012). `start` `list` of initial values, passed through. `...` additional parameters passed to `optimize`.

### Details

Exact formulas for the generator derivatives were derived in Hofert et al. (2012). Based on these formulas one can compute the (log-)densities of the Archimedean copulas. Note that for some densities, the formulas are numerically highly non-trivial to compute and considerable efforts were put in to make the computations numerically feasible even in large dimensions (see the source code of the Gumbel copula, for example). Both MLE and SMLE showed good performance in the simulation study conducted by Hofert et al. (2013) including the challenging 100-dimensional case. Alternative estimators (see also `enacopula`) often used because of their numerical feasibility, might break down in much smaller dimensions.

Note: SMLE for Clayton currently faces serious numerical issues and is due to further research. This is only interesting from a theoretical point of view, since the exact derivatives are known and numerically non-critical to evaluate.

### Value

emle

an R object of class `"mle2"` (and thus useful for obtaining confidence intervals) with the (simulated) maximum likelihood estimator.

.emle

`list` as returned by `optimize()` including the maximum likelihood estimator (does not confidence intervals but is typically faster).

### References

Hofert, M., Mächler, M., and McNeil, A. J. (2012). Likelihood inference for Archimedean copulas in high dimensions under known margins. Journal of Multivariate Analysis 110, 133–150.

Hofert, M., Mächler, M., and McNeil, A. J. (2013). Archimedean Copulas in High Dimensions: Estimators and Numerical Challenges Motivated by Financial Applications. Journal de la Société Française de Statistique 154(1), 25–63.

`mle2` from package bbmle and `mle` from stats4 on which `mle2` is modeled. `enacopula` (wrapper for different estimators). `demo(opC-demo)` and `demo(GIG-demo)` for examples of two-parameter families.

### Examples

```tau <- 0.25
(theta <- copGumbel@iTau(tau)) # 4/3
d <-  20
(cop <- onacopulaL("Gumbel", list(theta,1:d)))

set.seed(1)
n <- 200
U <- rnacopula(n,cop)

## Estimation
system.time(efm <- emle(U, cop))
summary(efm) # using bblme's 'mle2' method

## Profile likelihood plot [using S4 methods from bbmle/stats4] :
pfm <- profile(efm)
ci  <- confint(pfm, level=0.95)
ci
stopifnot(ci <= theta, theta <= ci)
plot(pfm)               # |z| against theta, |z| = sqrt(deviance)
plot(pfm, absVal=FALSE, #  z  against theta
show.points=TRUE) # showing how it's interpolated
## and show the true theta:
abline(v=theta, col="lightgray", lwd=2, lty=2)
axis(1, pos = 0, at=theta, label=quote(theta))

## Plot of the log-likelihood, MLE  and  conf.int.:
logL <- function(x) -efm@minuslogl(x)
# == -sum(copGumbel@dacopula(U, theta=x, log=TRUE))
logL. <- Vectorize(logL)
I <- c(cop@copula@iTau(0.1), cop@copula@iTau(0.4))
curve(logL., from=I, to=I, xlab=quote(theta),
ylab="log-likelihood",
main="log-likelihood for Gumbel")
abline(v = c(theta, efm@coef), col="magenta", lwd=2, lty=2)
axis(1, at=c(theta, efm@coef), padj = c(-0.5, -0.8), hadj = -0.2,
col.axis="magenta", label= expression(theta, hat(theta)[n]))
abline(v=ci, col="gray30", lwd=2, lty=3)
text(ci, extendrange(par("usr")[3:4], f= -.04),
"95% conf. int.", col="gray30", adj = -0.1)
```

copula documentation built on June 15, 2022, 5:07 p.m.