Copulas and Local Gaussian Correlation

Abstract

We are looking at copula models and dependence measures. Especially the recently developed local dependence measure called local Gaussian correlation (LGC) is presented, and its connection with the copula theory is explored. Theoretical LGC values of some famous (and not so famous) copula models are derived, and used to make plots that shows the dependence structure of the copula. At the end we are outlining some ways of using this dependence measure for copula selection and goodness-of-fit tests.