# Kastner, Gregor, Frühwirth-Schnatter, Sylvia. 2010. Efficient Bayesian Inference for Stochastic Volatility Models. 4th CSDA International Conference on Computational and Financial Econometrics (CFE'10), Senate House, University of London, Großbritannien, 10.12.-12.12.

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## Abstract

This talk considers Bayesian inference for stochastic volatility (SV) models using efficient MCMC inference. Our method is based on the popular approximation of the log $\chi^2$-distribuion by a mixture of 10 normal distribution which allows to sample the latent volatilities simultaneously, however, we introduce several improvements. First, rather than using standard forward-filtering-backward sampling to draw the volatilities, we apply a sparse Cholesky factor algorithm to the high-dimensional joint density of all volatilities. This reduces computing time considerably because it allows joint sampling without running a filter. Second, we consider various reparameterizations of the augmented SV model. Under the standard parametrization, augmented MCMC estimation turns out to be inefficient, in particular for the volatility of volatility parameter in the latent state equation. By considering a non-centered version of the SV model, this parameter is moved to the observation equation. Using MCMC estimation for this transformed model reduces the inefficiency factor in particular for volatility of volatility parameter considerably.

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## Publication's profile

Status of publication Published WU Paper presented at an academic conference or symposium English Efficient Bayesian Inference for Stochastic Volatility Models 4th CSDA International Conference on Computational and Financial Econometrics (CFE'10) 2010 10.12.-12.12 United Kingdom Senate House, University of London http://www.cfe-csda.org/cfe10/

## Associations

People
Kastner, Gregor (Details)
Frühwirth-Schnatter, Sylvia (Details)
Research areas (ÖSTAT Classification 'Statistik Austria')
1105 Computer software (Details)
1162 Statistics (Details)
5323 Econometrics (Details)
5701 Applied statistics (Details)
5707 Time series analysis (Details)