A triple-threshold leverage stochastic volatility model

作者：Wu, Xin Yu^*; Zhou, Hai Lin

来源：Studies in Nonlinear Dynamics and Econometrics, 2015, 19(4): 483-500.

DOI：10.1515/snde-2014-0044

• asymmetry
• efficient importance sampling
• leverage effect
• stochastic volatility
• threshold effect
• Value at Risk

In this paper we introduce a triple-threshold leverage stochastic volatility (TTLSV) model for financial return time series. The main feature of the model is to allow asymmetries in the leverage effect as well as mean and volatility. In the model the asymmetric effect is modeled by a threshold nonlinear structure that the two regimes are determined by the sign of the past returns. The model parameters are estimated using maximum likelihood (ML) method based on the efficient importance sampling (EIS) technique. Monte Carlo simulations are presented to examine the accuracy and finite sample properties of the proposed methodology. The EIS-based ML (EIS-ML) method shows good performance according to the Monte Carlo results. The proposed model and methodology are applied to two stock market indices for China. Strong evidence of the mean and volatility asymmetries is detected in Chinese stock market. Moreover, asymmetries in the volatility persistence and leverage effect are also discovered. The log-likelihood and Akaike information criterion (AIC) suggest evidence in favor of the proposed model. In addition, model diagnostics suggest that the proposed model performs relatively well in capturing the key features of the data. Finally, we compare models in a Value at Risk (VaR) study. The results show that the proposed model can yield more accurate VaR estimates than the alternatives.

• 出版日期2015-9
• 单位安徽财经大学