Portfolio single index (PSI) multivariate conditional and stochastic volatility models

Manabu Asai, Michael McAleer and Bernardo de Veiga

Mathematics and Computers in Simulation (MATCOM), 2008, vol. 78, issue 2, 209-214

Abstract: The paper develops the structure of parsimonious portfolio single index (PSI) multivariate conditional and stochastic constant correlation volatility models, and methods for estimating the underlying parameters. These multivariate estimates of volatility can be used for more accurate portfolio risk management, to enable efficient forecasting of value-at-risk (VaR) thresholds, and to determine optimal Basel Accord capital charges. A parsimonious portfolio single index approach for modelling the conditional and stochastic covariance matrices of a portfolio of assets is developed, and estimation methods for the conditional and stochastic volatility models are discussed.

Keywords: Single index models; Portfolio models; Multivariate volatility; Constant correlations; Asymmetry (search for similar items in EconPapers)
Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:78:y:2008:i:2:p:209-214

DOI: 10.1016/j.matcom.2008.01.014

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