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Multivariate Periodic Stochastic Volatility Models: Applications to Algerian dinar exchange rates and oil prices modeling

Nadia Boussaha, Faycal Hamdi and Saïd Souam ()

No 2018-14, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: The contribution of this paper is twofold. In a first step, we propose the so called Periodic Multivariate Autoregressive Stochastic Volatility (PV ARSV) model, that allows the Granger causality in volatility in order to capture periodicity in stochastic conditional variance. After a thorough discussion, we provide some probabilistic properties of this class of models. We thus propose two methods for the estimation problem, one based on the periodic Kalman filter and the other on the particle filter and smoother with Expectation-Maximization (EM) algorithm. In a second step, we propose an empirical application by modeling oil price and three exchange rates time series. It turns out that our modeling gives very accurate results and has a well volatility forecasting performance.

Keywords: Multivariate periodic stochastic volatility; periodic stationarity; periodic Kalman filter; particle filtering; exchange rates; Saharan Blend oil. (search for similar items in EconPapers)
JEL-codes: C32 C53 F31 G17 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ara, nep-ecm, nep-ene, nep-ets, nep-for and nep-ore
Date: 2018
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