Applying MGARCH models in finance

Minović, Jelena and Simeunović, Ivana (2008) Applying MGARCH models in finance. In: Challenges of economic sciences in the 21st Century. Institute of Economic Sciences, Belgrade, pp. 633-641. ISBN 978-86-80315-79-9

Preview

Text jm_2008_01.pdf - Published Version Available under License Creative Commons Attribution Non-commercial No Derivatives. Download (414kB) | Preview

Abstract

In this paper we give literature review about application of multivariate GARCH (MGARCH) models in modern finance and economy. First, we will present basic concept of multivariate volatility (GARCH) modeling. MGARCH models specify equations for how the covariance moves over time and these models have been designed to model the conditional covariance matrix of multiple time series. Problems of portfolio Value-at-Risk (VaR) estimates, portfolio optimization, risk assessment, volatility transmitting, asset allocation, hedging in futures markets, pricing of assets and derivatives, CAPM betas require a multivariate framework, because all problems mentioned above require covariances as inputs. This implicates very wide application of MGARCH models. Additionally, in this paper we will also describe the leverage effect in multivariate GARCH models.

Actions (login required)

View Item