New approaches of the DCC-GARCH residual: Application to foreign exchange rates
Autor: | Shiraya, Kenichiro, Suzuki, Kanji, Yamakami, Tomohisa |
---|---|
Rok vydání: | 2024 |
Předmět: | |
Druh dokumentu: | Working Paper |
Popis: | Two formulations are proposed to filter out correlations in the residuals of the multivariate GARCH model. The first approach is to estimate the correlation matrix as a parameter and transform any joint distribution to have an arbitrary correlation matrix. The second approach transforms time series data into an uncorrelated residual based on the eigenvalue decomposition of a correlation matrix. The empirical performance of these methods is examined through a prediction task for foreign exchange rates and compared with other methodologies in terms of the out-of-sample likelihood. By using these approaches, the DCC-GARCH residual can be almost independent. Comment: 26 pages, 18 figures |
Databáze: | arXiv |
Externí odkaz: |