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1
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2answers
81 views

Intuition behind interest rate models

I am modelling the 3M yield of US Treasuries using an ARMA/ GARCH approach. Most interest rate models (e.g. Vasicek) describe the process as follows: $r_{t}-r_{t-1} = some ARMA+ \epsilon_t $ ...
5
votes
0answers
871 views

Algorithm to fit AR(1)/GARCH(1,1) model of log-returns

I am fitting numerically an AR(1)/GARCH(1,1) process to index and stock log-returns, $r_t=\log(P_t/P_{t-1})$, where $P_t$ is the price at time $t$, and thus far am not clear on where the observed log ...
4
votes
0answers
74 views

Does GARCH derived variance explain the auto-correlation in a time series?

Given a time series of $u_i$ returns where i=1 to t. $\sigma_i$ is calculated from GARCH(1,1) as $\sigma_i^2=w+\alpha u_{i-1}^2 +\beta \sigma_{i-1}^2$ . What is the mathematical basis to say that ...
4
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0answers
134 views

Rolling window Kendall's tau against APARCH(1,1) correlation

Assume you want to forecast the correlation matrix of a stocks' basket (say 15 ~ 20 stocks from different sectors); assume you need to forecast at $T$ days because you will use the forecast ouput with ...
3
votes
0answers
148 views

Fitting Student t-distributions to log-returns

It seems that some tail-risk centric groups are bent on using Paretian and t-distributions to account for tail risk when fitting log-returns. It has been observed, however, that with and without ...
2
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0answers
480 views

FIGARCH estimation in R

I am trying to estimate a FIGARCH(1,1) model in R for Value-at-Risk purposes. As I understand it, the rugarch package does not support FIGARCH or FIEGARCH. To that end, I used the garchOxFit function ...
2
votes
0answers
654 views

How to calculate the conditional variance of a time series?

I am reading a paper where the term conditional variance is mentioned, but I am not really sure what is meant by this and how this can be calculated: Fig. 2 shows the conditional variances of the ...
2
votes
0answers
215 views

Error term/Innovation process in ARCH/GARCH processes?

I am wondering about the distribution of the error term/innovation process in a ARCH/GARCH process and its implementation, I am not sure about some points. The basic assumption is ...
2
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0answers
111 views

What does negative gamma mean in APGARCH model?

I got a gamma of -0.1321677. ...
2
votes
0answers
356 views

Markov-Switching E-GARCH with R

I am looking for a R library for modeling a Markov-Switching E-GARCH process. In other questions at StackExchange related to GARCH models, the package rugarch is often mentionned. Do you recommend it ...
1
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0answers
39 views

volume augmented garch(1,1) model in matlab

Actually I want to add volume traded of a stock in my Garch(1,1) model to forecast the volatility.In Matlab I can specify the model as garch(1,1) and then use estimate and forecast commands.But I am ...
1
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0answers
34 views

rugarch and rolling estimation

I use Rugarch for a long time in order to calibrate GARCH models on FX rates time series and perform simulations. I am trying to understand the ugarchroll method. However even if I can find plenty of ...
1
vote
0answers
307 views

GJR-GARCH modeling in stata

I am wanting to run a GJR-Garch model in stata and I am having problems identifying what command I need to put into the system. When using the commands I receive two different ways to do so and I am ...
0
votes
0answers
51 views

Volatility clustering but (G)ARCH not good fit

I'm looking at a time series that appears to be white noise. The ACF/PACF are in the test bounds. Applying the Ljung-Box test for various (maximum) lags gives me high p-values (i. e. I cannot reject ...
0
votes
0answers
126 views

Monte Carlo American Option Pricing under GARCH(1,1) volatitliy

I am attempting to price a couple of at-the-money American option using the LSM algorithm and GARCH(1,1) volatility. The LSM code I have works correctly for constant volatility, however, when I switch ...