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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
Éditeur
Université Paris-Dauphine
Titre de la collection
Cahiers de la Chaire Finance et Développement Durable
Numéro dans la collection
39
Ville d’édition
Paris
Pages
18
Métadonnées
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Auteur(s)
Zakoïan, Jean-Michel
Résumé (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.
Mots-clés
Dynamic conditional correlation; Existence of nonexplosive solutions; Multi-variate GARCH; Nonstationary processes; Time-varying models
JEL
G1 - General Financial Markets