Stochastic Volatility Models with Skewness Selection

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dc.contributor.authorMartins, Igor
dc.contributor.authorHEDIBERT FREITAS LOPES
dc.creatorMartins, Igor
dc.date.accessioned2024-10-28T19:59:17Z
dc.date.available2024-10-28T19:59:17Z
dc.date.issued2024
dc.description.abstractThis paper expands traditional stochastic volatility models by allowing for time-varying skewness without imposing it. While dynamic asymmetry may capture the likely direction of future asset returns, it comes at the risk of leading to overparameterization. Our proposed approach mitigates this concern by leveraging sparsity-inducing priors to automatically select the skewness parameter as dynamic, static or zero in a data-driven framework. We consider two empirical applications. First, in a bond yield application, dynamic skewness captures interest rate cycles of monetary easing and tightening and is partially explained by central banks’ mandates. In a currency modeling framework, our model indicates no skewness in the carry factor after accounting for stochastic volatility. This supports the idea of carry crashes resulting from volatility surges instead of dynamic skewness.en
dc.formatDigital
dc.format.extent16 p.
dc.identifier.doi10.3390/e26020142
dc.identifier.urihttps://repositorio.insper.edu.br/handle/11224/7185
dc.language.isoInglês
dc.relation.isboundProdução vinculada ao Núcleo de Ciências de Dados e Decisão
dc.relation.ispartofEntropy
dc.subjectStochastic volatilityen
dc.subjectSparsityen
dc.subjectSkewnessen
dc.titleStochastic Volatility Models with Skewness Selection
dc.typejournal article
dspace.entity.typePublication
local.identifier.sourceUrihttps://www.mdpi.com/1099-4300/26/2/142
local.publisher.countryNão Informado
local.subject.cnpqCIENCIAS EXATAS E DA TERRA::MATEMATICA
local.subject.cnpqCIENCIAS EXATAS E DA TERRA::PROBABILIDADE E ESTATISTICA
local.subject.cnpqENGENHARIAS::ENGENHARIA ELETRICA
local.subject.cnpqCIENCIAS SOCIAIS APLICADAS::ECONOMIA
local.typeArtigo Científico
publicationissue.issueNumber142
publicationvolume.volumeNumber26
relation.isAuthorOfPublication41f844cb-0e5a-4ef1-bb19-5ab1cec8e2ca
relation.isAuthorOfPublication.latestForDiscovery41f844cb-0e5a-4ef1-bb19-5ab1cec8e2ca
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