Abstract
We derive necessary and sufficient conditions for the positive definiteness of the predicted volatility matrix in a bivariate autoregressive volatility specification. These nonlinear inequality restrictions have strong implications in terms of causality between volatilities and covolatilities.
| Original language | English |
|---|---|
| Pages (from-to) | 624-636 |
| Number of pages | 13 |
| Journal | Journal of Financial Econometrics |
| Volume | 5 |
| Issue number | 4 |
| DOIs | |
| Publication status | Published - 1 Dec 2007 |
| Externally published | Yes |
Keywords
- GARCH model
- Nonlinear causality
- Stochastic volatility
- Wishart process
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