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I'm reading about volatility analysis here http://vlab.stern.nyu.edu/doc?topic=mdls. There are many variations of GARCH.

My question is: rather than trial-and-error approach, is there any systematic approach to decide when to use which type of GARCH? Or equivalently, each variation of GARCH is used in which situation?

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My 2 Zimbabwe cents:

A few years ago developing new ARCH like models became almost a fad and large numbers of them were published without a clear justification in my humble opinion.

However there is an important distinction I do think. Some markets are symmetric, while others (such as Stock Indexes) show a Leverage Effect where the volatility rises when the underlying goes down. It is important to use the right kind of model accordingly. For example for Stock Indexes I like GJR-GARCH which incorporates a leverage effect.

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You won't find a systematic approach, that would require the models to be arranged in some system, whereas generally each is an adjustment of GARCH. The best you can do is to know the usage cases of as many as possible and then use your own judgement as to which model is appropriate.

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