Title: A multivariate realized GARCH model
Authors: Ilya Archakov - University of Vienna (Austria) [presenting]
Peter Hansen - University of North Carolina (United States)
Asger Lunde - Aarhus University and CREATES (Denmark)
Abstract: A novel class of multivariate Realized GARCH models is proposed which is based on a convenient parametrization of the correlation matrix. The correlation matrix is characterized by a vector that can vary freely in the real space. A more parsimonious structure is often desired in practice, in particularly in high dimensional systems, and the model facilitates a simple and intuitive dimension reduction of the parametrized correlation matrix. We apply the model to returns of nine assets and demonstrate the dimension reduction by adopting a natural block correlation structure.