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Spatial specifications of multivariate volatility

National Research University Higher School of Economics. Spatial specifications of multivariate volatility. Lakshina V. O utline. Application Overview Problems BEKK vs DCC Spatial specifications. Application. Transmission of volatility between different markets and assets

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Spatial specifications of multivariate volatility

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  1. National Research University Higher School of Economics Spatial specifications of multivariate volatility Lakshina V.

  2. Outline • Application • Overview • Problems • BEKK vs DCC • Spatial specifications

  3. Application • Transmission of volatility between different markets and assets • Hedge ratios • Time-varying (CAPM) • Value-at-risk for portfolio

  4. Overview of models

  5. Setting • ,

  6. Problems • “Curse of dimensionality”: • Positive definiteness of intercept: • Stationarity, consistency and asymptotic normality of QMLE =

  7. Dynamic conditional correlations , ,

  8. Targeting (1) • The intercept is an explicit function of the long-run covariance (correlation). • The long-run covariance (correlation) solution is replaced by a consistent estimator based on the sample covariance (correlation).

  9. Targeting (2) • Scalar BEKK =

  10. Dynamic conditional correlations , , ,

  11. Asymptotics • Conditions • the model can be targeted; • the two-step estimators are consistent • the number of parameters increases as a power function of n, with an exponent less than or equal to 1. no asymptotics for DCC (Aielli (2009))

  12. Correlations from BEKK = QMLE is consistent

  13. Spatial BEKK , are diagonal no curse of dimensionality!

  14. Список компаний, входящих в портфель

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