Artikel
Modelling volatile time series with v-transforms and copulas
An approach to the modelling of volatile time series using a class of uniformity-preserving transforms for uniform random variables is proposed. V-transforms describe the relationship between quantiles of the stationary distribution of the time series and quantiles of the distribution of a predictable volatility proxy variable. They can be represented as copulas and permit the formulation and estimation of models that combine arbitrary marginal distributions with copula processes for the dynamics of the volatility proxy. The idea is illustrated using a Gaussian ARMA copula process and the resulting model is shown to replicate many of the stylized facts of financial return series and to facilitate the calculation of marginal and conditional characteristics of the model including quantile measures of risk. Estimation is carried out by adapting the exact maximum likelihood approach to the estimation of ARMA processes, and the model is shown to be competitive with standard GARCH in an empirical application to Bitcoin return data.
- Language
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Englisch
- Bibliographic citation
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Journal: Risks ; ISSN: 2227-9091 ; Volume: 9 ; Year: 2021 ; Issue: 1 ; Pages: 1-26 ; Basel: MDPI
- Classification
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Wirtschaft
- Subject
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ARMA model
copula
probability-integral transform
time series
volatility
- Event
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Geistige Schöpfung
- (who)
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McNeil, Alexander J.
- Event
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Veröffentlichung
- (who)
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MDPI
- (where)
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Basel
- (when)
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2021
- DOI
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doi:10.3390/risks9010014
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- McNeil, Alexander J.
- MDPI
Time of origin
- 2021