THE MULTIVARIATE supOU STOCHASTIC VOLATILITY MODEL

By Ole E. Barndorff-Nielsen, Robert Stelzer. 2013

69 citations recorded by the source corpus.

Using positive semidefinite supOU (superposition of Ornstein–Uhlenbeck type) processes to describe the volatility, we introduce a multivariate stochastic volatility model for financial data which is capable of modeling long range dependence effects. The finiteness of moments and the second‐order structure of the volatility, the log‐ returns, as well as their “squares” are discussed in detail. Moreover, we give several examples in which long memory effects occur and study how the model as well as the simple Ornstein–Uhlenbeck type stochastic volatility model behave under linear transformations. In particular, the models are shown to be preserved under invertible linear transformations. Finally, we discuss how (sup)OU stochastic volatility models can be combined with a factor modeling approach.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/9ffec2063d5e78582e00392f963232845fa454c3

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. Almut E. D. Veraart
2. Robert Stelzer
3. Fred Espen Benth
4. Ole E. Barndorff-Nielsen
5. N. Shephard
6. V. Todorov
7. Tim Bollerslev
8. Jeannette H. C. Woerner

In Finance

1. Almut E. D. Veraart
2. Ole E. Barndorff-Nielsen
3. Robert Stelzer
4. Fred Espen Benth
5. V. Todorov
6. Peter J. Brockwell
7. N. Shephard
8. Tim Bollerslev

In Management Science and Operations Research

1. Ole E. Barndorff-Nielsen
2. Robert Stelzer
3. Almut E. D. Veraart
4. Fred Espen Benth

Citations in the corpus

• Multivariate supOU processes (2010, methodology): “More examples in connection with stochastic volatility modeling can be found in [9].”
• Modelling energy spot prices by volatility modulated Levy-driven Volterra processes (2013, background): “It should be noted that this type of “superposition” is quite different from the concept behind supOU processes as studied in, for example, Barndorff-Nielsen and Stelzer [15].”
• Stochastic Volatility of Volatility and Variance Risk Premia (2013, unknown): “This is done by extensions of the idea of supOU processes, as introduced by Barndorff-Nielsen (2001) and further discussed in Barndorff-Nielsen & Shephard (2003), Barndorff-Nielsen & Leonenko (2005), Fasen & Klüppelberg (2007), Barndorff-Nielsen & Stelzer (2011),Barndorff-Nielsen & Stelzer (2012).”
• Riding on the smiles (2011, unknown): “Another multi-asset model in the spirit of Da Fonseca et al. (2007b) and based on a matrix pure jump volatility process was developed by Barndorff-Nielsen and Stelzer (2011).”