Multivariate Models

In this section, we will show how to perform multivariate models to calculate conditional correlation estimation and forecast the term structure using Excel. Several models will be considered, the J.P. Morgan RiskMetrics, the optimal decay model and three GARCH models the full diagonal GARCH, and its simpler derivative with variance targeting, and the superfast GARCH model (Bourgoin, 2002). For convenience purposes and simplicity, we will consider only a two-variable system, more can be added...