SSE/EFI Working Paper Series in Economics and Finance
An application of the analogy between vector ARCH and vector random coefficient autoregressive models
() and Timo Teräsvirta
Abstract: In this paper we derive conditions for the conditional
covariance matrix to be positive definite in a general vector ARCH model.
The conditions can be easily extended to the diagonal vector GARCH model.
For the general vector GARCH model, analytical expressions for the
conditions in terms of the parameters become complicated, but their
validity can in principle be checked numerically once the values of the
parameters are given.
Keywords: conditional covariance matrix; multivariate GARCH; multivariate volatility model; random coefficient model; volatility forecasting; (follow links to similar papers)
JEL-Codes: C32; (follow links to similar papers)
15 pages, November 20, 2002
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