Bayesian estimation of a dynamic conditional correlation model with multivariate Skew-Slash innovations

Cristina García de la Fuente, Pedro Galeano and Michael Peter Wiper

DES - Working Papers. Statistics and Econometrics. WS from Universidad Carlos III de Madrid. Departamento de Estadística

Abstract: Financial returns often present a complex relation with previous observations, along with a slight skewness and high kurtosis. As a consequence, we must pursue the use of flexible models that are able to seize these special features: a financial process that can expose the intertemporal relation between observations, together with a distribution that can capture asymmetry and heavy tails simultaneously. A multivariate extension of the GARCH such as the Dynamic Conditional Correlation model with Skew-Slashinnovations for financial time series in a Bayesian framework is proposed in the present document, and it is illustrated using an MCMC within Gibbs algorithm performed onsimulated data, as well as real data drawn from the daily closing prices of the DAX,CAC40, and Nikkei indices

Keywords: Bayesian; inference; Dynamic; Conditional; Correlation; Financial; time; series; Infinite; mixture; Kurtosis; Skew-Slash; MCMC (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-ecm and nep-ets
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Citations: View citations in EconPapers (2)

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