92 – 92 - Time Series and Finance
The Asymmetric Hyperbolic Generalized Autoregressive Conditional Heteroscedastic (A-HYGARCH) Model
K.C.M.R. Anjana Yatawara
Missouri University of Science and Technology
The Hyperbolic Generalized Autoregressive Conditional Heteroscedastic (HYGARCH) model proposed by James Davidson in 2004, nests both the GARCH and fractionally integrated GARCH models. It is an extensively used long memory process to model the long-range dependence in volatility. The HYGARCH model, however treats both positive and negative shocks the same. To address this shortcoming, we propose a parsimonious asymmetric HYGARCH(A-HYGARCH) model to capture both long memory as well as the asymmetric response to positive and negative shocks. Small sample properties of the parameter estimates is studied using Monte-Carlo simulation and the utility of the proposed model is illustrated using a real-life data set.