Positivity Constraints on the Conditional Variances in the Family of Conditional Correlation GARCH Models

Tomoaki Nakatani () and Timo Teräsvirta

No 675, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: 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.

Keywords: Multivariate GARCH; positivity constraints; conditional correlation (search for similar items in EconPapers)
JEL-codes: C32 C51 G19 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2007-10-15, Revised 2008-02-14
New Economics Papers: this item is included in nep-ecm and nep-ets
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Published in Finance Research Letters, 2008, pages 88-95.

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Journal Article: Positivity constraints on the conditional variances in the family of conditional correlation GARCH models (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0675

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