A new multivariate stochastic volatility model is developed in this paper. The main feature of this model is to allow threshold asymmetry in a factor covariance structure. The new model provides a parsimonious characterization of volatility and correlation asymmetry in response to market news....

A wide variety of conditional and stochastic variance models has been used to estimate latent volatility (or risk). In both the conditional and stochastic volatility literature, there has been some confusion between the definitions of asymmetry and leverage. In this paper, we first show the...