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VOL. 52 | 2006 Multivariate volatility models

## Abstract

Correlations between asset returns are important in many financial applications. In recent years, multivariate volatility models have been used to describe the time-varying feature of the correlations. However, the curse of dimensionality quickly becomes an issue as the number of correlations is $k(k-1)/2$ for $k$ assets. In this paper, we review some of the commonly used models for multivariate volatility and propose a simple approach that is parsimonious and satisfies the positive definite constraints of the time-varying correlation matrix. Real examples are used to demonstrate the proposed model.

## Information

Published: 1 January 2006
First available in Project Euclid: 28 November 2007

zbMATH: 1268.62137
MathSciNet: MR2427849

Digital Object Identifier: 10.1214/074921706000001058

Subjects:
Primary: 62M10
Secondary: 62M20