Skip to contents

Estimates the P-dynamics from JLL-based models

Source: R/JLL.R
JLL.Rd

Estimates the P-dynamics from JLL-based models

Usage

JLL(NonOrthoFactors, N, JLLinputs, CheckInputs = FALSE)

Arguments

NonOrthoFactors

numeric matrix (K x Td). Time series of risk factors before orthogonalization.

N

positive integer. Number of country-specific spanned factors.

JLLinputs

list. Necessary inputs to estimate JLL models:

  1. Economies: character vector. Set of C economies in the system.

  2. DomUnit: character. Name of the dominant economy, or "None" if not assigned (for "JLL No DomUnit" model).

  3. WishSigmas: logical. TRUE to estimate variance-covariance matrices and Cholesky factorizations; FALSE otherwise.

  4. SigmaNonOrtho: NULL or F x F matrix from non-orthogonalized dynamics.

  5. JLLModelType: character. Permissible choices: "JLL original", "JLL joint Sigma", "JLL No DomUnit".

CheckInputs

logical. Whether to perform a prior consistency check on the inputs provided in JLLinputs. Default is FALSE.

Value

List of model parameters from both the orthogonalized and non-orthogonalized versions of the JLL-based models

General Notation

  • Td: model time series dimension

  • C number of countries in the system.

  • K: total number of risk factors

References

Jotiskhatira, P. ; Le, A. and Lundblad, C. (2015). "Why do interest rates in different currencies co-move?" (Journal of Financial Economics)

Examples

# \donttest{
data(RiskFacFull)
RF_TS <- RiskFacFull
N <- 3
JLLinputs <- list(
  Economies = c("China", "Brazil", "Mexico", "Uruguay"), DomUnit = "China",
  WishSigmas = TRUE, SigmaNonOrtho = NULL, JLLModelType = "JLL original"
)
JLLPara <- JLL(RF_TS, N, JLLinputs)
# }