Estimation and Inference in Factor Copula Models with Exogenous Covariates

Understand

A factor copula model is proposed in which factors are either simulable or estimable from exogenous information.

• Point estimation and inference are based on a simulated methods of moments (SMM) approach with non-overlapping simulation draws.
• Consistency and limiting normality of the estimator is established and the validity of bootstrap standard errors is shown.
• Doing so, previous results from the literature are verified under low-level conditions imposed on the individual components of the factor structure.