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  • Arch & Garch: Motivation Behind The Models

    Transféré par

    Subbrahmanyam Cvv
    10 vues3 pages
    ARCH models volatility as a function of only past residuals, where volatility clusters since large changes tend to follow large changes and small changes follow small changes. GARCH builds on ARCH by including not only past residuals but also past variances in the volatility calculation, allowing both the level and clustering of volatility to impact future periods. GARCH models are often preferred to ARCH since they address ARCH's assumption that shocks have constant variance over time.

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    Arch & Garch

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    ARCH models volatility as a function of only past residuals, where volatility clusters since large changes tend to follow large changes and small changes follow small changes. GARCH builds on ARCH by including not only past residuals but also past variances in the volatility calculation, allowing both the level and clustering of volatility to impact future periods. GARCH models are often preferred to ARCH since they address ARCH's assumption that shocks have constant variance over time.

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    Attribution Non-Commercial (BY-NC)
    Téléchargez comme PPTX, PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    10 vues3 pages

    Arch & Garch: Motivation Behind The Models

    Transféré par

    Subbrahmanyam Cvv
    ARCH models volatility as a function of only past residuals, where volatility clusters since large changes tend to follow large changes and small changes follow small changes. GARCH builds on ARCH by including not only past residuals but also past variances in the volatility calculation, allowing both the level and clustering of volatility to impact future periods. GARCH models are often preferred to ARCH since they address ARCH's assumption that shocks have constant variance over time.

    Droits d'auteur :

    Attribution Non-Commercial (BY-NC)
    Téléchargez comme PPTX, PDF, TXT ou lisez en ligne sur Scribd
    Signaler comme contenu inapproprié
    sur 3

    ARCH & GARCH

    Motivation behind the models

    ARCH

    Tomorrows variance, is the function of my last errors

    GARCH

    Tomorrows variance, is the function of my last errors and last variance

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