Bayesian estimation of GARCH model with an adaptive proposal density

Details Bayesian estimation of GARCH model with an adaptive proposal density Bayesian estimation of GARCH model with an adaptive proposal density

2010-12-29

arxiv.org/abs/1012.5986v2

New Advances in Intelligent Decision Technologies, SCI 199, (2009) pp. 635-643

Economy

Quantitative Finance

Statistical Finance

10 pages, IDT 2009

Scientific paper

A Bayesian estimation of a GARCH model is performed for US Dollar/Japanese Yen exchange rate by the Metropolis-Hastings algorithm with a proposal density given by the adaptive construction scheme. In the adaptive construction scheme the proposal density is assumed to take a form of a multivariate Student's t-distribution and its parameters are evaluated by using the sampled data and updated adaptively during Markov Chain Monte Carlo simulations. We find that the autocorrelation times between the data sampled by the adaptive construction scheme are considerably reduced. We conclude that the adaptive construction scheme works efficiently for the Bayesian inference of the GARCH model.

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