We propose a generalization of the Dynamic Conditional Correlation multivariate GARCH model of Engle and of the Asymmetric Dynamic Conditional Correlation model of Cappiello et al. The model we propose introduces a block structure in parameter matrices that allows for interdependence with a reduced number of parameters. Our model nests the Flexible Dynamic Conditional Correlation model of Billio et al. and is named Quadratic Flexible Dynamic Conditional Correlation Multivariate GARCH. In the paper, we provide conditions for positive definiteness of the conditional correlations. We also present an empirical application to the Italian stock market comparing alternative correlation models for portfolio risk evaluation.

A generalised Dynamic Conditional Correlation model for portfolio risk evaluation

BILLIO, Monica;
2009-01-01

Abstract

We propose a generalization of the Dynamic Conditional Correlation multivariate GARCH model of Engle and of the Asymmetric Dynamic Conditional Correlation model of Cappiello et al. The model we propose introduces a block structure in parameter matrices that allows for interdependence with a reduced number of parameters. Our model nests the Flexible Dynamic Conditional Correlation model of Billio et al. and is named Quadratic Flexible Dynamic Conditional Correlation Multivariate GARCH. In the paper, we provide conditions for positive definiteness of the conditional correlations. We also present an empirical application to the Italian stock market comparing alternative correlation models for portfolio risk evaluation.
File in questo prodotto:
File Dimensione Formato  
Billio Caporin.pdf

non disponibili

Tipologia: Documento in Post-print
Licenza: Accesso chiuso-personale
Dimensione 518.33 kB
Formato Adobe PDF
518.33 kB Adobe PDF   Visualizza/Apri

I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10278/28090
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 32
  • ???jsp.display-item.citation.isi??? 29
social impact