[R-SIG-Finance] rmgarch DCC likelihood

Berk Koralp bkor@|p @end|ng |rom hotm@||@com
Mon Oct 28 21:00:46 CET 2019


When Tracing is on, the iteration steps show a different function value than the full log-likelihood function.

So full log-likelihood doesn’t get sent to the optimizer here.

The correlation component -0.5*[log(det(Rt))+(Z*(inv(Rt)*trans(Z)))] gets close to this traced function value but it seems to be always slightly off.

Where`s this difference coming from?

I used the optimal parameters produced by rugarch and rmgarch to replicate the model myself, and obtained the exact same individual likelihoods , and hence the same llh sum.

But removing components and leaving only correlation part doesn’t seem to match the traced function value.

Any help would be greatly appreciated.



Specs are as follows:

rX <- data.frame(rDAT1,rDAT2)

names(rX)[1] <- "rDAT1"

names(rX)[2] <- "rDAT2"

ug_spec = ugarchspec()

ug_spec <- ugarchspec(mean.model=list(armaOrder=c(0,0),include.mean = FALSE))

ugfit1 = ugarchfit(spec = ug_spec, data = rDAT1)

ugfit2 = ugarchfit(spec = ug_spec, data = rDAT2)

uspec.n = multispec(replicate(2, ugarchspec(mean.model = list(armaOrder = c(0,0),include.mean = FALSE))))

multf = multifit(uspec.n, rX)

spec1 = dccspec(uspec = uspec.n, dccOrder = c(1, 1), distribution = 'mvnorm')

fit1 = dccfit(spec1, data = rX, fit.control = list(eval.se = TRUE),solver.control= list(trace=TRUE), fit = multf)

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