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Ancillarity-Sufficiency Interweaving Strategy (ASIS) for Boosting MCMC Estimation of Stochastic Volatility Models

Gregor Kastner and Sylvia Fr\"uhwirth-Schnatter

Papers from arXiv.org

Abstract: Bayesian inference for stochastic volatility models using MCMC methods highly depends on actual parameter values in terms of sampling efficiency. While draws from the posterior utilizing the standard centered parameterization break down when the volatility of volatility parameter in the latent state equation is small, non-centered versions of the model show deficiencies for highly persistent latent variable series. The novel approach of ancillarity-sufficiency interweaving has recently been shown to aid in overcoming these issues for a broad class of multilevel models. In this paper, we demonstrate how such an interweaving strategy can be applied to stochastic volatility models in order to greatly improve sampling efficiency for all parameters and throughout the entire parameter range. Moreover, this method of "combining best of different worlds" allows for inference for parameter constellations that have previously been infeasible to estimate without the need to select a particular parameterization beforehand.

New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2017-06
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Published in Computational Statistics & Data Analysis 76, 408-423 (2014)

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Journal Article: Ancillarity-sufficiency interweaving strategy (ASIS) for boosting MCMC estimation of stochastic volatility models (2014) Downloads
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