Limit experiments of GARCH
From MaRDI portal
Publication:408085
DOI10.3150/10-BEJ328zbMATH Open1291.62162arXiv1203.0186MaRDI QIDQ408085FDOQ408085
Publication date: 29 March 2012
Published in: Bernoulli (Search for Journal in Brave)
Abstract: GARCH is one of the most prominent nonlinear time series models, both widely applied and thoroughly studied. Recently, it has been shown that the COGARCH model (which was introduced a few years ago by Kl"{u}ppelberg, Lindner and Maller) and Nelson's diffusion limit are the only functional continuous-time limits of GARCH in distribution. In contrast to Nelson's diffusion limit, COGARCH reproduces most of the stylized facts of financial time series. Since it has been proven that Nelson's diffusion is not asymptotically equivalent to GARCH in deficiency, in the present paper, we investigate the relation between GARCH and COGARCH in Le Cam's framework of statistical equivalence. We show that GARCH converges generically to COGARCH, even in deficiency, provided that the volatility processes are observed. Hence, from a theoretical point of view, COGARCH can indeed be considered as a continuous-time equivalent to GARCH. Otherwise, when the observations are incomplete, GARCH still has a limiting experiment, which we call MCOGARCH, which is not equivalent, but nevertheless quite similar, to COGARCH. In the COGARCH model, the jump times can be more random than for the MCOGARCH, a fact practitioners may see as an advantage of COGARCH.
Full work available at URL: https://arxiv.org/abs/1203.0186
Recommendations
Cites Work
- The pricing of options and corporate liabilities
- Fractionally integrated generalized autoregressive conditional heteroskedasticity
- Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation
- Title not available (Why is that?)
- Title not available (Why is that?)
- Title not available (Why is that?)
- Asymptotic methods in statistical decision theory
- Mathematical theory of statistics. Statistical experiments and asymptotic decision theory
- Asymptotic nonequivalence of GARCH models and diffusions
- ARCH models as diffusion approximations
- A continuous-time GARCH process driven by a Lévy process: stationarity and second-order behaviour
- Asymptotic equivalence of nonparametric regression and white noise
- Asymptotic equivalence of density estimation and Gaussian white noise
- Asymptotics in statistics: some basic concepts
- Title not available (Why is that?)
- Diffusion approximation for nonparametric autoregression
- Asymptotic approximation of nonparametric regression experiments with unknown variances
- Title not available (Why is that?)
- Asymptotic equivalence of nonparametric autoregression and nonparametric regression
- Asymptotic statistical equivalence for scalar ergodic diffusions
- Ultra high frequency volatility estimation with dependent microstructure noise
- A course on point processes
- COGARCH as a continuous-time limit of GARCH(1,1)
- GARCH modelling in continuous time for irregularly spaced time series data
- Joint analysis and estimation of stock prices and trading volume in Barndorff-Nielsen and Shephard stochastic volatility models
- Extremal behavior of stochastic volatility models
- Title not available (Why is that?)
Cited In (10)
- Asymptotic equivalence of discretely observed diffusion processes and their Euler scheme: small variance case
- Higher Moments and Prediction‐Based Estimation for the COGARCH(1,1) Model
- Asymptotic nonequivalence of GARCH models and diffusions
- Le cam theory on the comparison of statistical models
- Statistical inference for nonparametric GARCH models
- The continuous limit of weak GARCH
- Asymptotic equivalence for inhomogeneous jump diffusion processes and white noise
- Asymptotic equivalence for pure jump Lévy processes with unknown Lévy density and Gaussian white noise
- Statistical convergence of Markov experiments to diffusion limits
- The story of GARCH: a personal odyssey
This page was built for publication: Limit experiments of GARCH
Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q408085)
