Simulating data from corrected DCC-GARCH process

Description

This function simulates data from corrected DCC-GARCH process

Usage

1
simulateCDCC(a, b, Q, a0, A, B, nobs, ncut=1000)

Arguments

a

a constant in the DCC part.

b

a constant in the DCC part.

Q

a covariance matrix of the standardized residuals with ones on diagonal

a0

a vector of constants in the GARCH part.

A

a matrix of ARCH parameter.

B

a matrix of GARCH parameter.

nobs

the number of observations to be simulated.

ncut

the number of initial entries to be discarded. Default is 1000.

Details

If the ARCH and GARCH parameter matrices, A and B, are set as non-diagonal, the corresponding DGP allows for interactions in conditional variances (see Nakatani and Ter\"asvirta (2009) for instance).

For estimating a cDCC-GARCH model, estimateCDCC is available.

Value

This function returns a list with the following components.

CDCC

a matrix of the simulated cDCC.

z

a matrix of the simulated standardized residuals.

Q

a matrix of the simulated Q, which is transformed into cDCC.

h

a matrix of the simulated conditional variances.

eps

a matrix of the simulated time series with cDCC-GARCH errors.

References

Aielli, G.P. (2013), “Dynamic Conditional Correlation: On Properties and Estimation.” Journal of Business and Economic Statistics 31, 282–299.

Engle, R.F. and K. Sheppard (2001), “Theoretical and Empirical Properties of Dynamic Conditional Correlation Multivariate GARCH.” Stern Finance Working Paper Series FIN-01-027 (Revised in Dec. 2001), New York University Stern School of Business.

Engle, R.F. (2002), “Dynamic Conditional Correlation: A Simple Class of Multivariate Generalized Autoregressive Conditional Heteroskedasticity Models.” Journal of Business and Economic Statistics 20, 339–350.

Nakatani, T. and T. Ter\"asvirta (2009), “Testing for Volatility Interactions in the Constant Conditional Correlation GARCH Model”, Econometrics Journal, 12, 147–163.

See Also

estimateCDCC, summary.cdcc

Examples

1
## See examples in "estimateCDCC".