Adaptive Hyperbolic Asymmetric Power ARCH (A-HY-APARCH) model: Stability and Estimation

Abstract

In this paper, a new asymmetric GARCH type model that generalizes the Hyperbolic Asymmetric Power ARCH (HY-APARCH) process is proposed. The proposed model takes into consideration some characteristics of financial time series data like volatility clustering, long memory and structural changes. The necessary and sufficient conditions for the asymptotic stability of the model are derived and parameter estimation methods are proposed. The Monte Carlo Simulations are done to prove the performance of the estimation method.

Key words: long range dependence; structural changes; HYAPARCH.