Simulating cointegrated time series

Alexander Galenko*, David Morton, Elmira Popova, Ivilina Popova

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingConference contribution

1 Scopus citations

Abstract

When one models dependence solely via correlations, portfolio allocation models can perform poorly. This motivates considering dependence measures other than correlation. Cointegration is one such measure that captures long-term dependence. In this paper we present a new method to simulate cointegrated sample paths using the vector auto-regressive-to-anything (VARTA) algorithm. Our approach relies on new properties of cointegrated time series of financial asset prices and allows for marginal distributions from the Johnson system. The method is illustrated on two data sets, one real and one artificial.

Original languageEnglish (US)
Title of host publicationProceedings of the 2009 Winter Simulation Conference, WSC 2009
Pages483-493
Number of pages11
DOIs
StatePublished - 2009
Event2009 Winter Simulation Conference, WSC 2009 - Austin, TX, United States
Duration: Dec 13 2009Dec 16 2009

Publication series

NameProceedings - Winter Simulation Conference
ISSN (Print)0891-7736

Other

Other2009 Winter Simulation Conference, WSC 2009
Country/TerritoryUnited States
CityAustin, TX
Period12/13/0912/16/09

ASJC Scopus subject areas

  • Software
  • Modeling and Simulation
  • Computer Science Applications

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