GLM-methods for volatility models

Joan del Castillo, Youngjo Lee

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

We propose a multivariate volatility model for the behaviour of eight international equity indices. We show that many volatility models with heavy tails in financial work can be viewed as the GLM class of models with random effects in the dispersion. Hence, the h-likelihood approach, which provides efficient and simpler algorithms for GLM class, can be used as an estimation method for models used in finance. A comparison of the h-likelihood estimators with the ML estimators is made and its relative merits are discussed. © 2008 Sage Publications.
Original languageEnglish
Pages (from-to)263-283
JournalStatistical Modelling
Volume8
DOIs
Publication statusPublished - 16 Dec 2008

Keywords

  • Generalized linear models
  • Likelihood for random-effect
  • Lévy processes
  • Models
  • Normal inverse Gaussian distribution
  • Portfolio selection

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