Positivity Constraints on the Conditional Variances in the Family of Conditional Correlation GARCH Models
In this article, we derive a set of necessary and sufficient conditions for positivity of the vector conditional variance equation in multivariate GARCH models with explicit modelling of conditional correlation. These models include the constant conditional correlation GARCH model of Bollerslev (1990) and its extensions. Under the new conditions, it is possible to introduce negative volatility spillovers in the model. An empirical example illustrates usefulness of having such conditions in practice.
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|Date of creation:||15 Oct 2007|
|Date of revision:||15 Nov 1007|
|Publication status:||Published in Finance Research Letters, 2008, pages 88-95.|
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Research Paper Series
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