Comparison of BEKK GARCH and DCC GARCH Models: An Empirical Study

摘要：

Modeling volatility and co-volatility of a few zero-coupon bonds is a fundamental element in the field of fix-income risk evaluation. Multivariate GARCH model (MGARCH), an extension of the well-known univariate GARCH, is one of the most useful tools in modeling the co-movement of multivariate time series with time-varying covariance matrix. Grounded on the review of various formulations of multivariate GARCH model, this paper estimates two MGARCH models, BEKK and DCC form, respectively, based on the data of three AAA-rated Euro zero-coupon bonds with different maturities (6 months/1 year/2 years). Post-model diagnostics indicates satisfying fitting performance of these estimated MGARCH models. Moreover, this paper provides comparison on the goodness of fit and forecasting performances of these forms by adopting the mean absolute error (MAE) criterion. Throughout this application, the conclusion can be drawn that significant fitting and forecasting performances originate from the trade-off between parsimony and flexibility of the MGARCH models.

关键词： Volatility Multivariate GARCH Models BEKK/DCC Form Quasi - Maximum Likelihood Method Zero-Coupon Bonds

作者: Yiyu Huang Wenjing Su Xiang Li

作者单位: Key Laboratory of Geographical Information Science, Ministry of Education,East China Normal Universi Department of Statistics, School of Economics and Management, Lund University, Box 743 SE-22007 Lund Key Laboratory of Geographical Information Science, Ministry of Education,East China Normal Universi

会议类型: 国际会议

会议名称: 6th International Conference on Advanced Data Mining and Applications(第六届先进数据挖掘及应用国际会议 ADMA 2010)

会议地点: 重庆

会议语种:英文

页码: 99-110

在线出版日期: 2010-11-19（万方平台首次上网日期，不代表论文的发表时间）