1.Suppose that a researcher is interested in modelling the correlation between the returns of the ASX and...
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Question:
1.Suppose that a researcher is interested in modelling the correlation between the returns of the ASX and LSE markets.
(a)Write down a simple diagonal VECH model for this problem. Discuss the values for the coefficient estimates that you would expect.
(b)What other approaches to correlation modelling are available? Explain them in detail.
(c) What are the strengths and weaknesses of multivariate GARCH models relative to the
alternatives that you propose in part (b)?
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