Positivity Constraints on the Conditional Variances in the Family of Conditional Correlation GARCH Models

In this article, we derive a set of necessary and sufficient conditions for positivity of the vector conditional variance equation in multivariate GARCH models with explicit modelling of conditional correlation. These models include the constant conditional correlation GARCH model of Bollerslev (1990) and its extensions. Under the new conditions, it is possible to introduce negative volatility spillovers in the model. An empirical example illustrates usefulness of having such conditions in practice.

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Year of publication:	2007-10-15
Authors:	Nakatani, Tomoaki ; Teräsvirta, Timo
Institutions:	Economics Institute for Research (SIR), Handelshögskolan i Stockholm
Subject:	Multivariate GARCH \| positivity constraints \| conditional correlation

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Series:	SSE/EFI Working Paper Series in Economics and Finance.
Type of publication:	Book / Working Paper
Notes:	Published in Finance Research Letters, 2008, pages 88-95. The text is part of a series SSE/EFI Working Paper Series in Economics and Finance Number 675 10 pages
Classification:	C32 - Time-Series Models ; C51 - Model Construction and Estimation ; G19 - General Financial Markets. Other
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005649124