Time-varying covariance structures in currency markets

• Autor(a) principal: Lopes, Hedibert Freitas
• Data de Publicação: 2000
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
• Texto Completo: http://hdl.handle.net/10438/12224
• topic: Latent factor models; Time-varying loadings; Non-Gaussian dynamic models; Stachastic volatility components; Bayesian inference; Economia; Mercado financeiro; Análise estocástica; Modelos econométricos

In this article we use factor models to describe a certain class of covariance structure for financiaI time series models. More specifical1y, we concentrate on situations where the factor variances are modeled by a multivariate stochastic volatility structure. We build on previous work by allowing the factor loadings, in the factor mo deI structure, to have a time-varying structure and to capture changes in asset weights over time motivated by applications with multi pIe time series of daily exchange rates. We explore and discuss potential extensions to the models exposed here in the prediction area. This discussion leads to open issues on real time implementation and natural model comparisons.