Questions tagged [multivariate]

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145 views

INTERPRETING PCA ANALYSIS

I am having little trouble figuring our which variables are the most important when I am using PCA . What I am trying to do is see which variables explain the most variance when it comes to stock ...
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44 views

Manually calculating and backtesting VaR and CVaR from DCC-GARCH R

I estimated a GARCH fit to the log returns of three series (CAC 40, a french real estate index and french T10 bond yield series) using rugarch. I then manually ...
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0answers
115 views

Quasi Random Monte Carlo in m.v. portfolio optimization

Not specifying a correlation matrix for the Monte Carlo Simulation's random returns is equivalent to assuming no correlation or a correlation coefficient of zero, which will seriously and adversely ...
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0answers
54 views

Cega - Correlation Delta from multi-asset derivative

I want to calculate the Cega, i.e. correlation delta, for a multi-asset derivative numerically (the difference of the price from a tiny move in correlation). However, I found it is difficult to follow ...
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2answers
143 views

Simulating from a multivariate clayton copula

I am recently into copulas for finance, I've read several examples of how to generate dependent random variables with most kind of copulas. The problem for me is that all the books describe the case ...
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1answer
38 views

Historical quotes / prices of multiasset options

I am working on Lévy copulas, and I would like to try calibrating such techniques on real data. Where can I find quotes for multi-asset options? It could be exchange options or any other type of ...
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0answers
64 views

Rare Events in Normal Multivariate distributions

I don't work in finance, but I've stumbled upon a problem that you guys may have to deal with in your jobs. My problem is a random walk in high dim spaces ( > 100), in which I'm looking for vectors ...
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41 views

Can we generate(in high dimension) uniformly distributed variables in a finite volume other than a cube?

I'd like to know if there is in the literature a (computationally cheap) algorithm to generate uniformly distributed variables in high dimension for a volume other than a cube and without using ...
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0answers
68 views

Quanto basket payoff

I have a payoff that is the worst of the returns two indices: S&P500 (SPX) and Euro Stoxx 50 (SX5E). $\pi = \min \left\{\left(\frac{\text{SPX}_\tau-\text{SPX}_0}{\text{SPX}_0}\right),\left(\frac{\...
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0answers
43 views

Decomposition of interest rate risk [closed]

Hi I needed some clarification on something. I have three variables: V1 which is an indicator of an interest rate risk premia V2 which is an indicator of a credit risk premia V3 which is an ...
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0answers
129 views

Multivariate Hawkes Process Simulation

I am trying to implement Ogata's thinning algorithm to simulate multivariate Hawkes Processes in Python (the algorithm can be found here: https://www.math.fsu.edu/~ychen/research/Thinning%20algorithm....
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1answer
57 views

Forecasting default rates using a macroeconomic model

I am trying to forecast corporate default rates using macroeconomic data. I have a few explanatory variables (all the variables are explained in figure 2), which range from 2000 to 2017. On this ...
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0answers
40 views

Unconditional correlation in CCC GARCH

What is the unconditional correlation (covariance) in CCC GARCH model $$\mathbf{x}_{t+1} = \mathbf{H}_{t+1}^{1/2} \mathbf{z}_{t+1}$$ $$\mathbf{H}_{t+1} = \mathbf{D}_{t+1}^{1/2} \mathbf{R} \mathbf{D}_{...
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1answer
104 views

Understand the white noise condition in Vector Autoregression

In the following vector autoregression model with lag polynomial representation: $$\Phi (L) y_t= \epsilon_t$$ where $Y$ is the vector of endogenous variables, $\Phi$ is the parameters matrix, $\...
2
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1answer
205 views

How to compute a single Value-at-Risk (a single quantile) of portfolio returns taking into account correlation between individual returns?

Introduction My goal is to retrieve a single Value-at-Risk (VaR) of a N(0, H) random variable $X$ at the $\alpha \in (0,1)$ confidence level where H is a known d-dimensional positive definite matrix ...
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0answers
98 views

Monte Carlo Simulation of correlated returns based on different frequencies

I am simulating through Monte Carlo, multivariate correlated returns of different products composing an Oil&Gas portfolio. The historical prices (from which I computed the log-returns) of the ...
2
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1answer
156 views

How to do QE scheme for n correlated assets?

I'm trying to simulate correlated assets under Heston model. I coded the QE scheme for a single asset but i dont understand the next step: How should i set the correlation matrix given my n-asset ...
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1answer
291 views

Generally how to simulate bivariate (or multidimensional) BM sample paths?

A topic I am struggling with is the implementation of a (for the simplest higher dimensional case) bivariate normal distribution simulation for geometric brownian motion. The clearest explanation by ...
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2answers
100 views

Fit Simple VAR model in Matlab

I've been trying to fit the following model in Matlab: $\beta_{t}=a+Mt+A\beta_{t-1}+\epsilon_{t}$ Where a is a constant, M is a vector of trend parameters and A a cross-factor interaction matrix. I'...
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1answer
67 views

Multivariate normal when Cholesky decomp fails on Sigma

I'm trying to do multivariate distributions of returns on buckets where all the returns are at least 0.6 correlated at a 95% confidence level. I have the buckets, but their Sigmas cannot be decomposed ...
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0answers
16 views

Affect of choosing different combinations of variables for multivariate regression [closed]

If I have variables x1,x2,x3,and x4 that have correlation coefficients −0.9,−0.5,0.5, and 0.9 to another variable y, what is the effect of choosing different combinations of them in a multivariate ...
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1answer
1k views

Package for multivariate Garch Vech model for R?

I`m new to programming and searching a package for R which inherents the estimation for a Vech Garch(1,1). This is a multivariate Garch model which forms the residuals and the covariance matrix from a ...
4
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1answer
794 views

How to estimate parameters for 2 correlated Ornstein-Uhlenbeck processes with maximum likelihood?

I would like to use maximum likelihood to estimate the parameters of two correlated Ornstein-Uhlenbeck processes from empirical data. Do you have any good references for this? If you have any hints ...
2
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1answer
656 views

VEC GARCH (1,1) for 4 time series

I have to estimate a VEC GARCH(1,1) model in R. I already tried rmgarch, fGarch, ccgarch, mgarch, tsDyn. Has somebody estimated a model like that? ...
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2answers
2k views

Augmented Dickey-Fuller Test/ Unit Root test on multiple time series dataframe in R

I have a dataset/dataframe in which I have calculated the daily log returns of five thousand companies and these companies are as column as well. I want carry out ADF test on this dataframe. I have ...
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1answer
697 views

CCC-Garch predict

So I'm trying to measure the VaR of 2 stock with a multivariate GARCH model, so im using the CCC model. I need to predict the standard-diviation and the mean but the ...
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2answers
456 views

What is the preferred GARCH method in practice?

My advance apologies, if this question is too naive or basic. Please be patient with my first experiences with SE; ask for clarification, if needed. I recognize there are many (often-criticized) ...
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2answers
4k views

Multivariate GARCH in Python

Is there a package to run simplified multivariate GARCH models in Python? I found the Arch package but that seems to work on only univariate models. I'd like to test out some of the more simple ...
4
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3answers
3k views

Any package to run VAR-GARCH or VECM-GARCH models in R?

I need to estimate a multivariate VECM-GARCH (or simply VAR-GARCH) in R. Browsing on the internet, I did not find anything yet. Do you know if such kind of packages exists? Please, note that a BEKK ...
5
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1answer
592 views

DCC GARCH: specifying ARCH and GARCH parameter matrices in STATA

The command in STATA to estimate the DCC model of two variables is: mgarch dcc ( x1 x2=, noconstant) , arch(1) garch(1) distribution(t) $$ \begin{bmatrix} h_1{...
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4answers
16k views

Copulas simply explained

I try to understand the basic idea of copulas, however I am still struggling and hope that someone can help me. I understood that in general a copula is a function which links several marginal ...
2
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0answers
121 views

How to estimate constrained a constrained VAR(1) with MATLAB?

Suppose I want to estimate the following VAR(1) model: $$ Y_t = \mu + \Phi Y_{t-1} + \varepsilon_t $$ where $Y_t=(y_{1t}, y_{2t},…,y_{kt})'$, $\mu=(\mu_1,…,\mu_{k})’$ and $\Phi$ a matrix of ...
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1answer
58 views

Spread options on prices or returns?

I need some clarifications regarding spread options. I have always found them characterized as paying, at maturity, the difference between the prices of two underlying assets: $$ (S_1(T)-S_2(T)-K)^+ $$...
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0answers
94 views

Basket Default Swap (BDS)

I would like to understand better the $n^{th}$ to default pair spreads of a basket default swap containing $m>n$ entities. For example, consider 2 single name CDS's with same spread and same ...
6
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1answer
90 views

Mutivariate t markets

We know that some markets exhibit marginals well approximated by Student t distributions. But what is the dependence structure? Is the multivariate density really elliptical (as we all wish for) or ...
2
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1answer
996 views

How to see the impact of one variable on a set of other variables?

Editing my question: I have decided to use multiple factor model to model my stress test. I am using factor shock method to implement the propagation of shocks. I am doing this according to a book "...
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2answers
231 views

Interpretation of PCs

I have computed PC1 and PC2 wts on future contracts derived from cumulative log differences. How can I use them to get back the theoretical price of each contract using those 2 pcs? Thanks in advance....
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0answers
122 views

Estimating two normal random numbers with one equation

Subtitle: Estimating the correlation of the shocks driving two commodities in two multi-factor models I am fitting two 2-factor models to electricity and gas futures, respectively. In order to ...
6
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1answer
488 views

Major FX pairs - Pentahedron Data Structure

I read an interview today with Stephane Coquillaud. He talked about this idea of formulating a data set of the G5 currencies as a pentahedron. The obvious benefit is the fact that there is more ...
8
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3answers
2k views

Using rolling returns in a multivariate linear regression?

I am trying to use fundamental factors such as PE, BV, & CFO in a multivariate linear regression with the response variable being the rolling 1 month returns. But this approach seems flawed as the ...
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1answer
2k views

Time series price prediction and linear regression: using high/low rather than last quotes price

Discrete time series regression models, like ARIMA, are usually built around the assumption that we only have 1 available price for each period t, which I will call the Close. In reality asset time ...
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0answers
770 views

Alternative to Block Bootstrap for Multivariate Time Series

I currently use the following process for bootstrapping a multivariate time series in R: Determine block sizes - run the function b.star in the np package which produces a block size for each series ...