Modelling multivariate volatilities via conditionally uncorrelated components

Jianqing Fan, Mingjin Wang and Qiwei Yao

Journal of the Royal Statistical Society Series B, 2008, vol. 70, issue 4, 679-702

Abstract: Summary. We propose to model multivariate volatility processes on the basis of the newly defined conditionally uncorrelated components (CUCs). This model represents a parsimonious representation for matrix‐valued processes. It is flexible in the sense that each CUC may be fitted separately with any appropriate univariate volatility model. Computationally it splits one high dimensional optimization problem into several lower dimensional subproblems. Consistency for the estimated CUCs has been established. A bootstrap method is proposed for testing the existence of CUCs. The methodology proposed is illustrated with both simulated and real data sets.

Date: 2008
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https://doi.org/10.1111/j.1467-9868.2008.00654.x

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Working Paper: Modelling multivariate volatilities via conditionally uncorrelated components (2008)
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