Multivariate continuous-time autoregressive moving-average processes on cones

Fred Espen Benth and Sven Karbach

Stochastic Processes and their Applications, 2023, vol. 162, issue C, 299-337

Abstract: In this article we study multivariate continuous-time autoregressive moving-average (MCARMA) processes with values in convex cones. More specifically, we introduce matrix-valued MCARMA processes with Lévy noise and present necessary and sufficient conditions for processes from this class to be cone valued. We derive specific hands-on conditions in the following two cases: First, for classical MCARMA on Rd with values in the positive orthant Rd+. Second, for MCARMA processes on real square matrices assuming values in the cone of symmetric and positive semi-definite matrices. Both cases are relevant for applications and we give several examples of positivity ensuring parameter specifications. In addition to the above, we discuss the capability of positive semi-definite MCARMA processes to model the spot covariance process in multivariate stochastic volatility models. We justify the relevance of MCARMA based stochastic volatility models by an exemplary analysis of the second order moment structure of positive semi-definite well-balanced Ornstein–Uhlenbeck based models.

Keywords: Multivariate CARMA processes; Positive MCARMA; Positive semi-definite processes; Multivariate stochastic volatility (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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DOI: 10.1016/j.spa.2023.05.003

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