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Convolution-t Distributions

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  • Peter Reinhard Hansen
  • Chen Tong

Abstract

We introduce a new class of multivariate heavy-tailed distributions that are convolutions of heterogeneous multivariate t-distributions. Unlike commonly used heavy-tailed distributions, the multivariate convolution-t distributions embody cluster structures with flexible nonlinear dependencies and heterogeneous marginal distributions. Importantly, convolution-t distributions have simple density functions that facilitate estimation and likelihood-based inference. The characteristic features of convolution-t distributions are found to be important in an empirical analysis of realized volatility measures and help identify their underlying factor structure.

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  • Peter Reinhard Hansen & Chen Tong, 2024. "Convolution-t Distributions," Papers 2404.00864, arXiv.org.
    • Handle: RePEc:arx:papers:2404.00864
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