On Moment Non-Explosions for Wishart-Based Stochastic Volatility Models

15 Pages Posted: 23 Jan 2016 Last revised: 25 Apr 2018

See all articles by José Da Fonseca

José Da Fonseca

Auckland University of Technology - Faculty of Business & Law

Date Written: February 23, 2016

Abstract

This paper provides a result on moment non-explosions for a stock following a Wishart multidimensional stochastic volatility dynamic or a Wishart affine stochastic correlation dynamic when the parameter values satisfy certain constraints. By reformulating the stock dynamic in terms of the volatility path along with standard results on matrix Lyapunov and Riccati equations, a non-explosion result of the moment of order greater than one can be obtained. It extends to these frameworks a property well known for the Heston model.

Keywords: Moment non-explosions, Wishart multidimensional stochastic volatility model, Wishart affine stochastic correlation model

JEL Classification: G12,G13

Suggested Citation

Da Fonseca, José, On Moment Non-Explosions for Wishart-Based Stochastic Volatility Models (February 23, 2016). Available at SSRN: https://ssrn.com/abstract=2720927 or http://dx.doi.org/10.2139/ssrn.2720927

José Da Fonseca (Contact Author)

Auckland University of Technology - Faculty of Business & Law ( email )

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