Block Structure Multivariate Stochastic Volatility Models

Manabu Asai and Massimiliano Caporin

No EI 2009-51, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: Most multivariate variance models suffer from a common problem, the “curse of dimensionality”. For this reason, most are fitted under strong parametric restrictions that reduce the interpretation and flexibility of the models. Recently, the literature has focused on multivariate models with milder restrictions, whose purpose was to combine the need for interpretability and efficiency faced by model users with the computational problems that may emerge when the number of assets is quite large. We contribute to this strand of the literature proposing a block-type parameterization for multivariate stochastic volatility models.

Keywords: block structures; curse of dimensionality; multivariate stochastic volatility (search for similar items in EconPapers)
JEL-codes: C10 C32 C51 (search for similar items in EconPapers)
Date: 2009-12-17
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Citations: View citations in EconPapers (33)

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Working Paper: Block Structure Multivariate Stochastic Volatility Models (2010)
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