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A threshold factor multivariate stochastic volatility model

✍ Scribed by Mike K. P. So; C. Y. Choi

Publisher
John Wiley and Sons
Year
2009
Tongue
English
Weight
280 KB
Volume
28
Category
Article
ISSN
0277-6693

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

A new multivariate stochastic volatility model is developed in this paper. The main feature of this model is to allow threshold asymmetry in a factor covariance structure. The new model provides a parsimonious characterization of volatility and correlation asymmetry in response to market news. Statistical inferences are drawn from Markov chain Monte Carlo methods. We introduce news impact analysis to analyze volatility asymmetry with a factor structure. This analysis helps us to study different responses of volatility to historical market information in a multivariate volatility framework. Our model is successful when applied to an extensive empirical study of twenty stocks. Copyright Β© 2009 John Wiley & Sons, Ltd.

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