Estimating asymmetric dynamic distributions in high dimensions

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F67985998%3A_____%2F18%3A00495188" target="_blank" >RIV/67985998:_____/18:00495188 - isvavai.cz</a>
Result on the web
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DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Estimating asymmetric dynamic distributions in high dimensions
Original language description
We consider estimation of dynamic joint distributions of large groups of assets. Conventional likelihood functions based on ‘off‐the‐shelf’ distributions quickly become inaccurate as the number of parameters grows. Alternatives based on a fixed number of parameters do not permit sufficient flexibility in modelling asymmetry and dependence. This chapter considers a sequential procedure, where the joint patterns of asymmetry and dependence are unrestricted, yet the method does not suffer from the curse of dimensionality encountered in non‐parametric estimation. We construct a flexible multivariate distribution using tightly parameterized lower‐dimensional distributions coupled by a bivariate copula. This effectively replaces a high‐dimensional parameter space with many simple estimations with few parameters. We provide theoretical motivation for this estimator as a pseudo‐MLE with known asymptotic properties. In an asymmetric GARCH‐type application with regional stock indexes, the procedure provides excellent fit when dimensionality is moderate, and remains operational when the conventional method fails.
Czech name
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Czech description
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Project
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Continuities
I - Institucionalni podpora na dlouhodoby koncepcni rozvoj vyzkumne organizace

Publication year
2018
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

Book/collection name
Asymmetric dependence in finance: diversification, correlation and portfolio management in market downturns
ISBN
9781119289012
Number of pages of the result
52
Pages from-to
169-220
Number of pages of the book
296
Publisher name
Wiley
Place of publication
Chichester
UT code for WoS chapter
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