Multiscale Stochastic Volatility Model with Heavy Tails and Leverage Effects
| Autor: | Adam W. Kolkiewicz, Tony S. Wirjanto, Zhongxian Men |
|---|---|
| Jazyk: | angličtina |
| Rok vydání: | 2021 |
| Předmět: |
Leverage (finance)
MCMC Financial asset Gaussian Bayesian inference 01 natural sciences 010104 statistics & probability symbols.namesake 0502 economics and business ddc:330 Economics Econometrics 0101 mathematics slice sampler 050205 econometrics Stochastic volatility 05 social sciences Markov chain Monte Carlo HD61 Student's t-distribution HG1-9999 symbols Risk in industry. Risk management Foreign exchange market Finance |
| Zdroj: | Journal of Risk and Financial Management Volume 14 Issue 5 Journal of Risk and Financial Management, Vol 14, Iss 225, p 225 (2021) |
| ISSN: | 1911-8074 |
| DOI: | 10.3390/jrfm14050225 |
| Popis: | This paper studies multiscale stochastic volatility models of financial asset returns. It specifies two components in the log-volatility process and allows for leverage/asymmetric effects from both components while return innovation terms follow a heavy/fat tailed Student t distribution. The two components are shown to be important in capturing persistent dependence in return volatility, which is often absent in applications of stochastic volatility models which incorporate leverage/asymmetric effects. The models are applied to asset returns from a foreign currency market and an equity market. The model fits are assessed, and the proposed models are shown to compare favorably to the one-component asymmetric stochastic volatility models with Gaussian and Student t distributed innovation terms. |
| Databáze: | OpenAIRE |
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