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Next Dates: - Introduction to QuantLib Development with Luigi Ballabio, September 2 - 4, 2013 - £1700
An International Journal of Mathematics, Statistics and Financial Economics.
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THE MULTIVARIATE supOU STOCHASTIC VOLATILITY MODEL
Sat, 14 Apr 2012 05:31:58 GMT
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 modeling 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 modeling approach.
