Building Multivariate Time-Varying Smooth Transition Correlation GARCH Models, with an Application to the Four Largest Australian Banks

This paper proposes a methodology for building Multivariate Time-Varying STCC–GARCH models. The novel contributions in this area are the specification tests related to correlation component, extension of general model allow additional regimes, and detailed exposition systematic, improved modelling cycle required such nonlinear There is an R-package that includes steps cycle. Simulations demonstrate robustness recommended approach. illustrated using daily return series Australia’s four largest banks.