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http://hdl.handle.net/10419/30048
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| Title: | | Flexible and robust modelling of volatility comovements: a comparison of two multifractal models  |
| Authors: | | Liu, Ruipeng Lux, Thomas |
| Issue Date: | | 2010 |
| Series/Report no.: | | Kiel working paper 1594 |
| Abstract: | | Long memory (long-term dependence) of volatility counts as one of the ubiquitous stylized facts of financial data. Inspired by the long memory property, multifractal processes have recently been introduced as a new tool for modeling financial time series. In this paper, we propose a parsimonious version of a bivariate multifractal model and estimate its parameters via both maximum likelihood and simulation based inference approaches. In order to explore its practical performance, we apply the model for computing value-at-risk and expected shortfall statistics for various portfolios and compare the results with those from an alternative bivariate multifractal model proposed by Calvet et al. (2006) and the bivariate CC-GARCH of Bollerslev (1990). As it turns out, the multifractal models provide much more reliable results than CC-GARCH, and our new model compares well with the one of Calvet et al. although it has an even smaller number of parameters. |
| Subjects: | | Long memory multifractal models simulation based inference value-at-risk expected shortfall |
| JEL: | | C11 C13 G15 |
| Document Type: | | Working Paper |
| Appears in Collections: | | Publikationen von Forscherinnen und Forschern des IfW Economists Online Kieler Arbeitspapiere, IfW
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