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A class of DCC asymmetric GARCH models driven by exogenous variables

Zakoïan, Jean-Michel (2010), A class of DCC asymmetric GARCH models driven by exogenous variables. https://basepub.dauphine.fr/handle/123456789/5529

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Type
Document de travail / Working paper
Date
2010
Publisher
Université Paris-Dauphine
Series title
Cahiers de la Chaire Finance et Développement Durable
Series number
39
Published in
Paris
Pages
18
Metadata
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Author(s)
Zakoïan, Jean-Michel
Abstract (EN)
This paper considers Dynamic Conditional Correlations (DCC) GARCH models in which the time-varying coefficients, including the conditional correlation matrix, are functions of the realizations of an exogenous stochastic process. Time series generated by this model are in general nonstationary. Necessary and sufficient conditions are given for the existence of non-explosive solutions, and for the existence of second-order moments of these solutions. Potential applications concern the modeling of the volatility of a vector of energy prices, the model coefficients depending on the weather conditions.
Subjects / Keywords
Dynamic conditional correlation; Existence of nonexplosive solutions; Multi-variate GARCH; Nonstationary processes; Time-varying models
JEL
G1 - General Financial Markets