Asymmetric stable stochastic volatility models: estimation, filtering, and forecasting

Francisco Blasques, Siem Jan Koopman and Karim Moussa

Journal of Time Series Analysis, 2025, vol. 46, issue 6, 1098-1124

Abstract: This article considers a stochastic volatility model featuring an asymmetric stable error distribution and a novel way of accounting for the leverage effect. We adopt simulation‐based methods to address key challenges in parameter estimation, the filtering of time‐varying volatility, and volatility forecasting. More specifically, we make use of the indirect inference method for estimating the static parameters, while the latent volatility is extracted using the extremum Monte Carlo method. Both parameter estimation and volatility extraction are easily adapted to other model specifications, such as those based on other error distributions or on other dynamic processes for volatility. Illustrations are presented for a simulated dataset and for an empirical dataset of daily Bitcoin returns.

Date: 2025
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https://doi.org/10.1111/jtsa.12780

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Persistent link: https://EconPapers.repec.org/RePEc:bla:jtsera:v:46:y:2025:i:6:p:1098-1124

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