A multivariate long memory stochastic volatility model
AbstractThis paper develops a multivariate long-memory stochastic volatility model which allows the multi-asset long-range dependence in the volatility process. The motivation is from the fact that both autocorrelations and cross-correlations of some proxies of exchange rate volatility exhibit strong evidence of long-memory behavior. The statistical properties of the new stochastic volatility model provide theoretical explanation to the common findings that long memory volatility properties are more apparent if we use absolute return as a volatility proxy than squared return. Results of the real data application show that our model outperforms an existing multivariate stochastic volatility model.
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Bibliographic InfoArticle provided by Elsevier in its journal Physica A: Statistical Mechanics and its Applications.
Volume (Year): 362 (2006)
Issue (Month): 2 ()
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Web page: http://www.journals.elsevier.com/physica-a-statistical-mechpplications/
Cross-correlation; Exchange rate; Long-range dependence; Quasi maximum likelihood; Return; Volatility of volatility;
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