ADCC(1,1) Recursion

Computes Q and R matrices for ADCC(1,1) model. ADCC adds asymmetric response to negative shocks via gamma parameter.

The ADCC recursion is: Q_t = Ω + α*(z_t-1z't-1) + γ*(nt-1n't-1) + β*Qt-1

where n_t = z_t * I(z_t < 0) (element-wise negative indicator) and Ω = (1 - α - β)Qbar - γNbar

Usage

adcc_recursion(std_resid, Qbar, alpha, gamma, beta, Nbar = NULL)

Arguments

std_resid

Matrix of standardized residuals (T x k)

Qbar

Unconditional covariance matrix (k x k)

alpha

ADCC alpha parameter (response to shocks)

gamma

ADCC gamma parameter (asymmetric response to negative shocks)

beta

ADCC beta parameter (persistence)

Nbar

Unconditional covariance of negative shocks (k x k), computed if NULL

Value

List with success, Q, R, Nbar, and error info if failed