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Publication Detail
Variational Heteroscedastic Volatility Model
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Publication Type:Journal article
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Authors:Yin Z, Barucca P
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Publication date:11/04/2022
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Keywords:q-fin.ST, q-fin.ST, cs.AI, cs.LG
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Author URL:
Abstract
We propose Variational Heteroscedastic Volatility Model (VHVM) -- an
end-to-end neural network architecture capable of modelling heteroscedastic
behaviour in multivariate financial time series. VHVM leverages recent advances
in several areas of deep learning, namely sequential modelling and
representation learning, to model complex temporal dynamics between different
asset returns. At its core, VHVM consists of a variational autoencoder to
capture relationships between assets, and a recurrent neural network to model
the time-evolution of these dependencies. The outputs of VHVM are time-varying
conditional volatilities in the form of covariance matrices. We demonstrate the
effectiveness of VHVM against existing methods such as Generalised
AutoRegressive Conditional Heteroscedasticity (GARCH) and Stochastic Volatility
(SV) models on a wide range of multivariate foreign currency (FX) datasets.
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