Dynamic Equicorrelation Stochastic Volatility

Yuta Kurose and Yasuhiro Omori ()
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Yuta Kurose: Center for the Study of Finance and Insurance, Osaka University,

No CIRJE-F-907, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: 　　 A multivariate stochastic volatility model with dynamic equicorrelation and cross leverage effect is proposed and estimated. Using a Bayesian approach, an efficient Markov chain Monte Carlo algorithm is described where we use the multi-move sampler, which generates multiple latent variables simultaneously. Numerical examples are provided to show its sampling efficiency in comparison with the simple algorithm that generates one latent variable at a time given other latent variables. Furthermore, the proposed model is applied to the multivariate daily stock price index data. The empirical study shows that our novel model provides a substantial improvement in forecasting with respect to out-of-sample hedging performances

Pages: 32 pages
Date: 2013-11
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-for
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Related works:
Journal Article: Dynamic equicorrelation stochastic volatility (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2013cf907

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