We derive several multivariate control charts to monitor the mean vector of multivariate GARCH processes under the presence of changes, by means of maximizing the generalized likelihood ratio. This presentation is rounded up by a comparative performance study based on extensive Monte Carlo simulations. An empirical illustration shows how the obtained results can be applied to real data. Note: T...

High-frequency financial return time series data have stylized facts such as the long-range dependence, fat-tails, asymmetric dependence, and volatility clustering. In this paper, a multivariate model which describes those stylized facts is presented. To construct the model, a multivariate ARMA-GARCH model is considered along with fractional Lévy process. The fractional Lévy process in this pap...

This paper addresses several questions surrounding volatility forecasting and its use in the estimation of optimal hedging ratios. Specifically: Are there economic gains by nesting time-series econometric models (GARCH) and dynamic programming models (therefore forecasting volatility several periods out) in the estimation of hedging ratios whilst accounting for volatility in the futures bid–ask...

Financial returns exhibit common behavior described at best by factor models, but also fat tails, which may be captured by α-stable distributions. This paper concentrates on estimating factor models with multivariate α-stable distributed and independent factors and idiosyncratic noises under the assumption of time constant distribution (static factor models) or time-varying conditional distribu...

Volatility is a key parameter used in many financial applications, from derivatives valuation to asset management and risk management. Volatility measures the size of the errors made in modeling returns and other financial variables. It was discovered that, for vast classes of models, the average size of volatility is not constant but changes with time and is predictable. Autoregressive conditi...

Environmental issues have become increasingly important in economic research and policy for sustainable development. Such issues are tracked by the Dow Jones Sustainable Indexes (DJSI) through financial market indexes that are derived from the Dow Jones Global Indexes. The environmental sustainability activities of firms are assessed using criteria in three areas, namely economic, environmental...

This paper develops a dynamic approximate factor model in which returns are time-series heteroskedastic. The heteroskedasticity has three components: a factor-related component, a common asset-speciÞc component, and a purely asset-speciÞc component. We develop a new multivariate GARCH model for the factor-related component. We develop a univariate stochastic volatility model linked to a cross-s...

The estimation of multivariate GARCH models remains a challenging task, even in modern computer environments. This manuscript shows how Independent Component Analysis can be used to estimate the Generalized Orthogonal GARCH model in a fraction of the time otherwise required. The proposed method is a two-step procedure, separating the estimation of the correlation structure from that of the univ...