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Bayesian estimation of GARCH model with an adaptive proposal density

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  • Tetsuya Takaishi

Abstract

A Bayesian estimation of a GARCH model is performed for US Dollar/Japanese Yen exchange rate by the Metropolis-Hastings algorithm with a proposal density given by the adaptive construction scheme. In the adaptive construction scheme the proposal density is assumed to take a form of a multivariate Student's t-distribution and its parameters are evaluated by using the sampled data and updated adaptively during Markov Chain Monte Carlo simulations. We find that the autocorrelation times between the data sampled by the adaptive construction scheme are considerably reduced. We conclude that the adaptive construction scheme works efficiently for the Bayesian inference of the GARCH model.

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  • Tetsuya Takaishi, 2010. "Bayesian estimation of GARCH model with an adaptive proposal density," Papers 1012.5986, arXiv.org, revised Dec 2010.
    • Handle: RePEc:arx:papers:1012.5986
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    1. Sangjoon Kim & Neil Shephard & Siddhartha Chib, 1998. "Stochastic Volatility: Likelihood Inference and Comparison with ARCH Models," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 65(3), pages 361-393.
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