  Pair-copula constructions are flexible dependence models that use bivariate
copulas as building blocks. In this paper, we use generalized additive models
to extend them by allowing covariates effects. Borrowing ideas from a
traditionally univariate context, we let each pair-copula parameter depend
directly on the covariates in a parametric, semiparametric or nonparametric
way. We propose a sequential estimation method that we study by simulation, and
apply it to investigate the time-varying dependence structure between the
intraday returns on four major foreign exchange rates. An R package, a script
reproducing the results in this article, and additional simulation results are
provided as supplementary material.
