Lucas, André; Opschoor, Anne - 2016 - This version: September 1, 2016
We introduce a new fractionally integrated model for covariance matrix dynamics based on the long-memory behavior of … daily realized covariance matrix kernels and daily return observations. We account for fat tails in both types of data by … appropriate distributional assumptions. The covariance matrix dynamics are formulated as a numerically efficient matrix recursion …
