I want to understand the procedure of how to predict with the GARCH Modell. Therefore it is said that a one day ahead forecast is easy due to the fact that the GARCH equation can produce this. Furthermore forecasts for more than one day can be achieved by recursive substitution according to Rachev (Financial Econometrics):
Somehow I don't get how the equation is transformed. I always stuck at the point where I would substitute the variance with 8.34 and expand the equation to a sum. However I would never come to the point where it looks like 8.35.
Thanks a lot! Clemens