Modeling financial time series with the skew slash distribution

Abstract

Financial returns often present moderate skewness and high kurtosis. As a consequence, it is natural to look for a model that is exible enough to capture these characteristics. The proposal is to undertake inference for a generalized autoregressive conditional heteroskedastic (GARCH) model, where the innovations are assumed to follow a skew slash distribution. Both classical and Bayesian inference are carried out. Simulations and a real data example illustrate the performance of the proposed methodology.