Comparison results for GARCH processes

DOI10.1239/JAP/1409932667MaRDI QIDQ2923429zbMATH OpenOpenAlexFDO

Authors Fabio Bellini, Franco Pellerey, Carlo Sgarra, Salimeh Yasaei Sekeh

Publication date 15 October 2014

Published in Journal of Applied Probability (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1204.3786, https://projecteuclid.org/euclid.jap/1409932667

zbMATH Keywords

GARCH processeskurtosismultivariate convex orderpeakednessstochastic orderingssupermodularity

Mathematics Subject Classification ID

Inequalities; stochastic orderings (60E15) Statistical methods; risk measures (91G70)

Abstract: We consider the problem of stochastic comparison of general Garch-like processes, for different parameters and different distributions of the innovations. We identify several stochastic orders that are propagated from the innovations to the Garch process itself, and discuss their interpretations. We focus on the convex order and show that in the case of symmetric innovations it is also propagated to the cumulated sums of the Garch process. More generally, we discuss multivariate comparison results related to the multivariate convex and supermodular order. Finally we discuss ordering with respect to the parameters in the Garch (1,1) case. Key words: Garch, Convex Order, Peakedness, Kurtosis, Supermodularity.

Review text

The goal of the paper is to use various notions of stochastic orderings to systematically compare log-returns modelled by GARCH processes. The authors show how, in general, stochastic orderings (such as increasing, convex and increasing convex order) of the i.i.d. innovations extend to the corresponding stochastic orderings of the log-returns. Under an additional hypothesis on the symmetry of the innovations, convex order is also preserved in the more involved case of the sum of log-returns. A multivariate setting as well as stochastic orderings with respect to the parameters of the process are also considered with similar conclusions.

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Cites work

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Cited in

(2)

• Stochastic ordering by \(g\)-expectations
• Tail risk monotonicity in GARCH(1,1) models

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