Last time we showed how to estimate a CCC and DCC volatility model. Here I describe an advancement labored by Engle and Kelly (2012) bearing the name: *Dynamic equicorrelation*. The idea is nice and the paper is well written.

Departing where the previous post ended, once we have (say) the DCC estimates, instead of letting the variance-covariance matrix be, we force some structure by way of averaging correlation **across** assets. Generally speaking, correlation estimates are greasy even without any breaks in dynamics, so I think forcing some structure is for the better.