4.3 Article

Gram-Charlier densities: a multivariate approach

Journal

QUANTITATIVE FINANCE
Volume 9, Issue 7, Pages 855-868

Publisher

ROUTLEDGE JOURNALS, TAYLOR & FRANCIS LTD
DOI: 10.1080/14697680902773611

Keywords

Empirical finance; Econometrics of financial markets; Financial assets; VaR

Funding

  1. Spanish Ministry of Education [SEJ2006-06104/ECON]

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This paper introduces a new family of multivariate distributions based on Gram-Charlier and Edgeworth expansions. This family encompasses many of the univariate semi-non-parametric densities proposed in financial econometrics as marginal of its different formulations. Within this family, we focus on the analysis of the specifications that guarantee positivity to obtain well-defined multivariate semi-non-parametric densities. We compare two different multivariate distributions of the family with the multivariate Edgeworth-Sargan, Normal, Student's t and skewed Student's t in an in-and out-of-sample framework for financial returns data. Our results show that the proposed specifications provide a reasonably good performance, and would therefore be of interest for applications involving the modelling and forecasting of heavy-tailed distributions.

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