Unit 2: Modelling Volatility – Conditional Heteroscedastic Models
Introduction to Modelling Volatility
Volatility, a measure of the dispersion of returns for a given security or market index, is a ke...
Numerical Example
EWMA Volatility Calculation Step 1: Given Data Decay factor (λ): 0.94 Yesterday's estimated va...
Autoregressive Conditional Heteroscedasticity (ARCH) Models
ARCH models, introduced by Engle (1982), are a class of statistical models for time series data ...
Numerical Example
Comparison: With a positive return yesterday (2%), today's conditional variance was 0.000...
Generalized Autoregressive Conditional Heteroscedasticity (GARCH) Models
GARCH models, introduced by Bollerslev (1986), are an extension of ARCH models that allow the co...
Numerical
Estimation of GARCH Models
The estimation of GARCH (Generalized Autoregressive Conditional Heteroskedasticity) models invol...
Forecasting with GARCH Models
Introduction to Forecasting with GARCH Models One of the primary uses of GARCH models is forecas...
Numericals
These calculations give us a basic understanding of how volatility is forecasted using a GA...