Kendall’s tau and agglomerative clustering for structure determination of hierarchical Archimedean copulas

Abstract

Several successful approaches to structure determination of hierarchical Archimedean copulas (HACs) proposed in the literature rely on agglomerative clustering and Kendall’s correlation coefficient. However, there has not been presented any theoretical proof justifying such approaches. This work fills this gap and introduces a theorem showing that, given the matrix of the pairwise Kendall correlation coefficients corresponding to a HAC, its structure can be recovered by an agglomerative clustering technique.

Keywords

• structure determination
• agglomerative clustering
• kendall’s tau
• archimedean copula
• 62h99