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Leverage, heavy-tails and correlated jumps in stochastic volatility models

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  • Jouchi Nakajima

    (Bank of Japan)

  • Yasuhiro Omori

    (Faculty of Economics, University of Tokyo)

Abstract

This paper proposes the efficient and fast Markov chain Monte Carlo estimation methods for the stochastic volatility model with leverage effects, heavy-tailed errors and jump components, and for the stochastic volatility model with correlated jumps. We illustrate our method using simulated data and analyze daily stock returns data on S&P500 index and TOPIX. Model comparisons are conducted based on the marginal likelihood for various SV models including the superposition model.

Suggested Citation

  • Jouchi Nakajima & Yasuhiro Omori, 2007. "Leverage, heavy-tails and correlated jumps in stochastic volatility models," CIRJE F-Series CIRJE-F-514, CIRJE, Faculty of Economics, University of Tokyo.
    • Handle: RePEc:tky:fseres:2007cf514
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    References listed on IDEAS

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