4) (6 points) When jointly modeling two variables in a two-equation model with shocks Eur and...
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4) (6 points) When jointly modeling two variables in a two-equation model with shocks Eur and £2, you define the conditional variance-covariance ma- trix as H = [ ;], hi h121 h211 h221 where E₁ = V₁ (111) 1/2, 82= v2 (h221) 1/2, var(v₁) = var(v2) = 1, and hijt are just the time t conditional variance of the shock i if i= j, and it is the conditional covariance if i # j. (a) Write down the conditional variances of the multivariate GARCH(1,1) process when you allow the volatility terms to interact with each other. (b) What is the problem when estimating such a model? (c) What is the typical restriction imposed to estimate such a model? 4) (6 points) When jointly modeling two variables in a two-equation model with shocks Eur and £2, you define the conditional variance-covariance ma- trix as H = [ ;], hi h121 h211 h221 where E₁ = V₁ (111) 1/2, 82= v2 (h221) 1/2, var(v₁) = var(v2) = 1, and hijt are just the time t conditional variance of the shock i if i= j, and it is the conditional covariance if i # j. (a) Write down the conditional variances of the multivariate GARCH(1,1) process when you allow the volatility terms to interact with each other. (b) What is the problem when estimating such a model? (c) What is the typical restriction imposed to estimate such a model?
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a The conditional variances of the multivariate GARCH11 process allowing the volatility terms to int... View the full answer
Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
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