The multivariate supOU stochastic volatility model

Publikation: Working paperForskning

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  • Rp09 42

    Forlagets udgivne version, 350 KB, PDF-dokument

  • Ole Barndorff-Nielsen
  • Robert Stelzer, TUM Institute for Advanced Study & Zentrum Mathematik, Technische Universität München, Tyskland
  • Institut for Økonomi
Using positive semidefinite supOU (superposition of Ornstein-Uhlenbeck type) processes
to describe the volatility, we introduce a multivariate stochastic volatility model
for financial data which is capable of modelling long range dependence effects.
The finiteness of moments and the second order structure of the volatility, the log returns,
as well as their "squares" are discussed in detail. Moreover, we give several examples
in which long memory effects occur and study how the model as well as the
simple Ornstein-Uhlenbeck type stochastic volatility model behave under linear transformations.
In particular, the models are shown to be preserved under invertible linear
transformations. Finally, we discuss how (sup)OU stochastic volatility models can be
combined with a factor modelling approach.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider21
StatusUdgivet - 2009

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