Gibbs Sampling for ARCH Models in Finance
The paper develops a simple estimation procedure for Bayesian ARCH models: The Gibbs-importance algorithm (also called independence chain) is applied for the simulation step involving the ARCH parameters. We demonstrate this approach to model the volatility between the Dollar, the DM and the Yen. An extension of the model to multivariate VAR-VARCH models is proposed.
KeywordsExchange Rate Posterior Distribution Markov Chain Monte Carlo Algorithm Financial Time Series Arch Model
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