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- Title
On a buffered threshold autoregressive stochastic volatility model.
- Authors
Wang, Qingzheng; Yiu, Ka‐Fai Cedric; Wong, Heung
- Abstract
This article introduces a new autoregressive stochastic volatility (SV) model with a new piecewise linear structure such that the regime‐switching mechanism has a buffer zone where regime‐switching is delayed. The proposed model allows us to model the hysteretic phenomenon of the regime‐switching existing on both the mean equation and the volatility equation. A full description of the proposed Markov chain Monte Carlo method is given. In the empirical study, we consider the daily closing prices of NIKKEI stock average, the exchange rate for US Dollar to Japanese Yen and Hang Seng Index. Deviance information criterion measure shows that our proposed model outperforms the classical threshold SV models.
- Subjects
HANG Seng Index; AUTOREGRESSIVE models; STOCK price indexes; STOCHASTIC models; JAPANESE yen; MARKOV chain Monte Carlo; U.S. dollar
- Publication
Applied Stochastic Models in Business & Industry, 2022, Vol 38, Issue 6, p974
- ISSN
1524-1904
- Publication type
Article
- DOI
10.1002/asmb.2689