Mean-Reverting 4/2 Principal Components Model. Financial Applications
In this paper, we propose a new multivariate mean-reverting model incorporating state-of-the art 4/2 stochastic volatility and a convenient principal component stochastic volatility (PCSV) decomposition for the stochastic covariance. We find a quasi closed-form characteristic function and propose an...
Main Authors: | Marcos Escobar-Anel, Zhenxian Gong |
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Format: | Article |
Language: | English |
Published: |
MDPI AG
2021-07-01
|
Series: | Risks |
Subjects: | |
Online Access: | https://www.mdpi.com/2227-9091/9/8/141 |
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