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Structural Laplace Transform and Compound Autoregressive Models

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  • Serge Darolles
  • Christian Gourieroux
  • Joann Jasiak

Abstract

. This paper presents a new general class of compound autoregressive (Car) models for non‐Gaussian time series. The distinctive feature of the class is that Car models are specified by means of the conditional Laplace transforms. This approach allows for simple derivation of the ergodicity conditions and ensures the existence of forecasting distributions in closed form, at any horizon. The last property is of particular interest for applications to finance and economics that investigate the term structure of variables and/or of their nonlinear transforms. The Car class includes a number of time‐series models that already exist in the literature, as well as new models introduced in this paper. Their applications are illustrated by examples of portfolio management, term structure and extreme risk analysis.

Suggested Citation

  • Serge Darolles & Christian Gourieroux & Joann Jasiak, 2006. "Structural Laplace Transform and Compound Autoregressive Models," Journal of Time Series Analysis, Wiley Blackwell, vol. 27(4), pages 477-503, July.
  • Handle: RePEc:bla:jtsera:v:27:y:2006:i:4:p:477-503
    DOI: 10.1111/j.1467-9892.2006.00479.x
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