A multivariate threshold stochastic volatility model. (English) Zbl 1151.91540
Summary: We introduce in this paper a multivariate threshold stochastic volatility model for multiple financial return time series. This model allows the dynamic structure of return and volatility to change according to a threshold model while accounting for the interdependence of financial returns. Through the threshold volatility modeling, we can understand the impact of market news on volatility asymmetry. Estimation of unknown parameters are carried out using Markov chain Monte Carlo techniques. Simulations show that our estimators are reliable in moderately large sample sizes. We apply the model to three market indice data and estimate time-varying correlations among the indice returns.
MSC:
| 91B28 | Finance etc. (MSC2000) |
| 91B84 | Economic time series analysis |
| 91B82 | Statistical methods; economic indices and measures |
Keywords:
dynamic correlation; finance; stochastic volatility; threshold nonlinearity; volatility asymmetryReferences:
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