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BL-GARCH model with elliptical distributed innovations

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Author Info

  • Abdou Kâ Diongue

    ()
    (UFR SAT - Université Gaston Berger de Saint-Louis Sénégal - Université Gaston Berger de Saint-Louis)

  • Dominique Guegan

    ()
    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris)

  • Rodney C. Wolff

    ()
    (School of Mathematical Sciences - Queensland University of Technology)

Abstract

In this paper, we discuss the class of Bilinear GATRCH (BL-GARCH) models which are capable of capturing simultaneously two key properties of non-linear time series : volatility clustering and leverage effects. It has been observed often that the marginal distributions of such time series have heavy tails ; thus we examine the BL-GARCH model in a general setting under some non-Normal distributions. We investigate some probabilistic properties of this model and we propose and implement a maximum likelihood estimation (MLE) methodology. To evaluate the small-sample performance of this method for the various models, a Monte Carlo study is conducted. Finally, within-sample estimation properties are studied using S&P 500 daily returns, when the features of interest manifest as volatility clustering and leverage effects.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00368340.

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Date of creation: Jul 2010
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Publication status: Published, Journal of Statistical Computation and Simulation, 2010, 80, 7, 775-791
Handle: RePEc:hal:cesptp:halshs-00368340

Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00368340
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Web page: http://hal.archives-ouvertes.fr/

Related research

Keywords: BL-GARCH process - elliptical distribution - leverage effects - Maximum Likelihood - Monte Carlo method - volatility clustering;

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Cited by:
  1. Marius-Cristian Frunza & Dominique Guegan, 2010. "Risk assessment for a Structured Product Specific to the CO2 Emission Permits Market," Documents de travail du Centre d'Economie de la Sorbonne 10054, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. Choi, M.S. & Park, J.A. & Hwang, S.Y., 2012. "Asymmetric GARCH processes featuring both threshold effect and bilinear structure," Statistics & Probability Letters, Elsevier, vol. 82(3), pages 419-426.
  3. Marius-Cristian Frunza & Dominique Guegan & Antonin Lassoudière, 2010. "Statistical evidence of tax fraud on the carbon allowances market," Documents de travail du Centre d'Economie de la Sorbonne 10069, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  4. repec:hal:journl:halshs-00368336 is not listed on IDEAS
  5. Marius-Cristian Frunza & Dominique Guegan & Antonin Lassoudière, 2010. "Dynamic factor analysis of carbon allowances prices: From classic Arbitrage Pricing Theory to Switching Regimes," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00505145, HAL.
  6. repec:hal:journl:halshs-00504209 is not listed on IDEAS

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