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Estimating the Wishart Affine Stochastic Correlation Model using the empirical characteristic function

Estimating the Wishart Affine Stochastic Correlation Model using the empirical characteristic... Abstract This paper provides the first estimation strategy for the Wishart Affine Stochastic Correlation (WASC) model. We provide elements showing that the use of empirical characteristic function-based estimates is advisable as this function is exponential affine in the WASC case. We use a GMM estimation strategy with a continuum of moment conditions based on the characteristic function. We present the estimation results obtained using a dataset of equity indexes. The WASC model captures most of the known stylized facts associated with financial markets, including leverage and asymmetric correlation effects. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Studies in Nonlinear Dynamics & Econometrics de Gruyter

Estimating the Wishart Affine Stochastic Correlation Model using the empirical characteristic function

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Publisher
de Gruyter
Copyright
Copyright © 2014 by the
ISSN
1081-1826
eISSN
1558-3708
DOI
10.1515/snde-2012-0009
Publisher site
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Abstract

Abstract This paper provides the first estimation strategy for the Wishart Affine Stochastic Correlation (WASC) model. We provide elements showing that the use of empirical characteristic function-based estimates is advisable as this function is exponential affine in the WASC case. We use a GMM estimation strategy with a continuum of moment conditions based on the characteristic function. We present the estimation results obtained using a dataset of equity indexes. The WASC model captures most of the known stylized facts associated with financial markets, including leverage and asymmetric correlation effects.

Journal

Studies in Nonlinear Dynamics & Econometrics – de Gruyter

Published: May 1, 2014

References

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    Gouriéroux
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    Amisano
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    Bertholon
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    Hall
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    Duffie
  • Multivariate stochastic variance models of
    Harvey
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    Carrasco
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    Daleckii
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    Fonseca
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    Fonseca
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    Jiang
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    Carrasco
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    Eraker
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    Gallant
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    Donoghue
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    Heston
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    Genz
  • Efficient Estimation of Jump Diffusions and General Dynamic Models with a Continuum of Moment Conditions of
    Carrasco
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    Asai
  • Estimation of Continuous - Time Processes via the Empirical Characteristic Function of
    Jiang
  • Model Selection Tests for Nonlinear Dynamic Models
    Rivers
  • Estimation of Jump - Diffusion Process via Empirical Characteristic Function FAME Research Paper Series rp International Center for Financial Asset Management and
    Rockinger
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    Piessens
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    Nelson
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    Gouriéroux
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    Fonseca
  • The Impact of Jumps in Volatility and Returns The of
    Eraker
  • Estimation of Jump - Diffusion Process via Empirical Characteristic Function FAME Research Paper Series rp International Center for Financial Asset Management and
    Rockinger
  • Estimation of the Objective and Risk - Neutral Distributions based on Moments of Integrated Volatility of
    Garcia
  • Likelihood Ratio Tests for Model Selection and non - nested Hypotheses
    Vuong
  • Estimating the Historical Mean Reverting Parameter in the CIR model CREST Working Paper
    Gouriéroux
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    Newey
  • Recovering Risk Aversion from Option Prices and Realized Returns of
    Jackwerth
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    Nelson
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    Singleton
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    Cappiello
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    Sahalia
  • Renault Temporal Aggregation of Volatility Models of
    Meddahi
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    Heston
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    Gouriéroux
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    Roll
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    Carrasco
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    Chacko
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    Engle
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    Buraschi
  • Asymmetric Correlations of Equity Portfolios of
    Ang
  • Forecasting Multivariate Realized Stock Market Volatility of
    Bauer
  • Maximum Likelihood Estimation of Latent Affine Processes The of
    Bates
  • The Autoregressive Process of Multivariate Stochastic Volatility of
    Gouriéroux
  • Maximum Likelihood Estimation of Generalized Ito Processes with Discretely Sampled Data
    Lo
  • Continuous Time Process for Stochastic Risk
    Gouriéroux
  • Fully Symmetric Interpolatory Rules for Multiple Integrals Over Infinite Regions with Gaussian Weight of and
    Genz
  • Comparing Density Forecasts via Weighted Likelihood Ratio Tests of and
    Amisano
  • of Non Functions Depending on a Parameter Translations
    Daleckii
  • Processes of
    Wishart
  • Asset Pricing Modelling of
    Bertholon
  • Convergence Theorems for a Class of Simulated Annealing Probability
    Belisle
  • Estimation of Affine Pricing Models Using the Empirical Characteristic Function of
    Singleton
  • Lie Groups Lie An Elementary introduction Graduate Texts in Mathematics New York
    Hall
  • Analyse sur les groupes de Lie
    Faraut
  • Model Selection Tests for Nonlinear Dynamic Models
    Rivers
  • Estimation of Affine Pricing Models Using the Empirical Characteristic Function of
    Singleton
  • Asymmetric Dynamics in the Correlations of Global Equity and Returns of
    Cappiello
  • Recovering Risk Aversion from Option Prices and Realized Returns of
    Jackwerth
  • Statistical Inference for Random - Variance Option Pricing of
    Pastorello
  • Asymptotic Filtering Theory for Univariate Arch Models
    Nelson
  • On Leverage in a Stochastic Volatility Model of
    Yu
  • Multivariate stochastic variance models of
    Harvey
  • Multivariate Models Survey of
    Bauwens
  • Simulated Moments Estimation of Markov Models of Asset Prices
    Duffie
  • Processes of
    Wishart
  • de subroutine package for automatic integration New York
    Piessens
  • Statistical Inference for Random - Variance Option Pricing of
    Pastorello
  • Multivariate Models Survey of
    Bauwens
  • Generalization of GMM to a Continuum of Moment Conditions
    Carrasco
  • Renault Calibration by Simulation for Small Sample Bias Correction InSimulation Based Inference in edited by Week pp University
    Gouriéroux
  • Likelihood Ratio Tests for Model Selection and non - nested Hypotheses
    Vuong
  • Convergence Theorems for a Class of Simulated Annealing Probability
    Belisle
  • Renault Temporal Aggregation of Volatility Models of
    Meddahi
  • The International Crash of September
    Roll
  • On Leverage in a Stochastic Volatility Model of
    Yu
  • Estimating the Historical Mean Reverting Parameter in the CIR model CREST Working Paper
    Gouriéroux
  • Graduate Texts in New York
    Bathia
  • Spectral GMM Estimation of Continuous - Time Processes of
    Chacko
  • Correlation Risk Optimal Choice Working paper
    Buraschi
  • The Autoregressive Process of Multivariate Stochastic Volatility of
    Gouriéroux
  • Generalization of GMM to a Continuum of Moment Conditions
    Carrasco
  • Monotone Functions Analytic Continuation New York
    Donoghue
  • Analyse sur les groupes de Lie
    Faraut
  • Which moments to match
    Gallant
  • Forecasting Multivariate Realized Stock Market Volatility of
    Bauer
  • Derivative Pricing with Multivariate Stochastic Volatility of
    Gouriéroux
  • Maximum Likelihood Estimation of Latent Affine Processes The of
    Bates
  • Studies of Stock Prices Volatility Changes Proceeding from the American Statistical Association Section
    Black