Explosive volatilities for threshold-GARCH processes generated by asymmetric innovations
The threshold-asymmetric GARCH (TGARCH, for short) models have been useful for analyzing asymmetric volatilities arising mainly from financial time series. Most of the research on TGARCH has been directed to the stationary case. In this article, motivated by unstable features in recent time series in Korea amid worldwide financial crisis, we introduce "explosive volatilities" in TGARCH processes. The term of explosive volatility in TGARCH context is defined and is justified. Moreover, asymmetric innovations such as normal mixtures are considered in modeling explosive TGARCH and hence we are concerned with a class of explosive TGARCH models generated by asymmetric innovations. Assuming normal mixture innovations, maximum likelihood (ML) estimation method is discussed and procedures for computing ML-estimates are described. To illustrate, exchange rate data of Korea-Won to US dollars are analyzed and it is observed that the data exhibit a certain explosive volatility and in turn, our model performs better than various competing models.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 80 (2010)
Issue (Month): 1 (January)
|Contact details of provider:|| Web page: http://www.elsevier.com/wps/find/journaldescription.cws_home/622892/description#description|
|Order Information:|| Postal: http://www.elsevier.com/wps/find/supportfaq.cws_home/regional|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bai, Xuezheng & Russell, Jeffrey R. & Tiao, George C., 2003. "Kurtosis of GARCH and stochastic volatility models with non-normal innovations," Journal of Econometrics, Elsevier, vol. 114(2), pages 349-360, June.
- Taewook Lee & Sangyeol Lee, 2009. "Normal Mixture Quasi-maximum Likelihood Estimator for GARCH Models," Scandinavian Journal of Statistics, Danish Society for Theoretical Statistics;Finnish Statistical Society;Norwegian Statistical Association;Swedish Statistical Association, vol. 36(1), pages 157-170.
- Li, C W & Li, W K, 1996. "On a Double-Threshold Autoregressive Heteroscedastic Time Series Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 253-74, May-June.
- Baillie, Richard T. & Bollerslev, Tim & Mikkelsen, Hans Ole, 1996.
"Fractionally integrated generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 74(1), pages 3-30, September.
- Tom Doan, . "RATS programs to replicate Baillie, Bollerslev, Mikkelson FIGARCH results," Statistical Software Components RTZ00009, Boston College Department of Economics.
- Pan, Jiazhu & Wang, Hui & Tong, Howell, 2008. "Estimation and tests for power-transformed and threshold GARCH models," Journal of Econometrics, Elsevier, vol. 142(1), pages 352-378, January.
- Hwang, S. Y. & Kim, Tae Yoon, 2004. "Power transformation and threshold modeling for ARCH innovations with applications to tests for ARCH structure," Stochastic Processes and their Applications, Elsevier, vol. 110(2), pages 295-314, April.
- Hwang, S. Y. & Basawa, I. V., 2004. "Stationarity and moment structure for Box-Cox transformed threshold GARCH(1,1) processes," Statistics & Probability Letters, Elsevier, vol. 68(3), pages 209-220, July.
- Higgins, Matthew L & Bera, Anil K, 1992. "A Class of Nonlinear ARCH Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(1), pages 137-58, February.
- Park, J.A. & Baek, J.S. & Hwang, S.Y., 2009. "Persistent-threshold-GARCH processes: Model and application," Statistics & Probability Letters, Elsevier, vol. 79(7), pages 907-914, April.
- Nelson, Daniel B., 1990. "Stationarity and Persistence in the GARCH(1,1) Model," Econometric Theory, Cambridge University Press, vol. 6(03), pages 318-334, September.
- Engle, Robert F & Ng, Victor K, 1993.
" Measuring and Testing the Impact of News on Volatility,"
Journal of Finance,
American Finance Association, vol. 48(5), pages 1749-78, December.
- Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:eee:stapro:v:80:y:2010:i:1:p:26-33. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.