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Modelling multivariate volatilies via conditionally uncorrelated components

Jianqing Fan·Mingjin Wang·Qiwei Yao
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Abstract

We propose to model multivariate volatility processes based on the newly defined conditionally uncorrelated components (CUCs). This model represents a parsimonious representation for matrix-valued processes. It is flexible in the sense that we may fit each CUC with any appropriate univariate volatility model. Computationally it splits one high-dimensional optimization problem into several lower-dimensional subproblems. Consistency for the estimated CUCs has been established. A bootstrap test is proposed for testing the existence of CUCs. The proposed methodology is illustrated with both simulated and real data sets.

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Jianqing Fan, Mingjin Wang, Qiwei Yao. 2005-06-02. Modelling multivariate volatilies via conditionally uncorrelated components. https://arxiv.org/abs/math/0506027

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