On the stationarity of Dynamic Conditional Correlation models
Jean-David Fermanian, Hassan Malongo
TL;DR
This paper establishes conditions for the existence, uniqueness, and finite moments of stationary solutions in Dynamic Conditional Correlation GARCH models, using Markov chain theory and Tweedie's criteria.
Contribution
It provides new theoretical conditions ensuring stationarity and moment existence for DCC-GARCH models, enhancing understanding of their long-term behavior.
Findings
Conditions for stationarity of DCC-GARCH models
Criteria for the uniqueness of solutions
Results on the existence of finite moments
Abstract
We provide conditions for the existence and the unicity of strictly stationary solutions of the usual Dynamic Conditional Correlation GARCH models (DCC-GARCH). The proof is based on Tweedie's (1988) criteria, after having rewritten DCC-GARCH models as nonlinear Markov chains. Moreover, we study the existence of their finite moments.
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