DCC-GARCH Estimation

Sammanfattning: When modelling more that one asset, it is desirable to apply multivariate modeling to capture the co-movements of the underlying assets. The GARCH models has been proven to be successful when it comes to volatility forecast- ing. Hence it is natural to extend from a univariate GARCH model to a multivariate GARCH model when examining portfolio volatility. This study aims to evaluate a specific multivariate GARCH model, the DCC-GARCH model, which was developed by Engle and Sheppard in 2001. In this pa- per different DCC-GARCH models have been implemented, assuming both Gaussian and multivariate Student’s t distribution. These distributions are compared by a set of tests as well as Value at Risk backtesting.