LR property of non-well-formed scales

This article studies generated scales having exactly three different step sizes within the language of algebraic combinatorics on words. These scales and their corresponding step-patterns are called non well formed. We prove that they can be naturally inserted in the Christoffel tree of well-formed words. Our primary focus in this study is on the left- and right-Lyndon factorization of these words. We will characterize the non-well-formed words for which both factorizations coincide. We say that these words satisfy the LR property and show that the LR property is satisfied exactly for half of the non-well-formed words. These are symmetrically distributed in the extended Christoffel tree. Moreover, we find a surprising connection between the LR property and the Christoffel duality. Finally, we prove that there are infinitely many Christoffel–Lyndon words among the set of non-well-formed words and thus there are infinitely many generated scales having as step-pattern a Christoffel–Lyndon word.

Realized Matrix-Exponential Stochastic Volatility with Asymmetry, Long Memory and Spillovers

The paper develops a novel realized matrix-exponential stochastic volatility model of multivariate returns and realized covariances that incorporates asymmetry and long memory (hereafter the RMESV-ALM model). The matrix exponential transformation guarantees the positivedefiniteness of the dynamic covariance matrix. The contribution of the paper ties in with Robert Basmann’s seminal work in terms of the estimation of highly non-linear model specifications (“Causality tests and observationally equivalent representations of econometric models”, Journal of Econometrics, 1988, 39(1-2), 69–104), especially for developing tests for leverage and spillover effects in the covariance dynamics. Efficient importance sampling is used to maximize the likelihood function of RMESV-ALM, and the finite sample properties of the quasi-maximum likelihood estimator of the parameters are analysed. Using high frequency data for three US financial assets, the new model is estimated and evaluated. The forecasting performance of the new model is compared with a novel dynamic realized matrix-exponential conditional covariance model. The volatility and co-volatility spillovers are examined via the news impact curves and the impulse response functions from returns to volatility and co-volatility.