AppliedNumeric answer
Volatility that clusters · Part 2 of 4
Daily returns follow a GARCH(1,1): with , and .
Yesterday's conditional volatility was 1% and the return was −4%. What is today's conditional volatility, in per cent, to two decimal places?
Answer with a number. Fractions, powers and expressions like 23/6 or C(52,5) are read correctly in practice.
The worked solution is in Premium
The answer, the full working and the one idea to take away – for this and all 1,322 questions in the bank. Answer it in practice and your working is marked, with a known mistake named when you make one.
Learn the method
More time series questions
- A HAR model forecasts tomorrow’s realised volatility as 0.1+0.4 RV_d+0.3 RV_w+0.2 RVₘ.Foundation
- Daily equity returns show almost no autocorrelation, but their squares show a lot.Applied
- Using EWMA with λ = 0.94, yesterday’s volatility estimate was 1% and today’s return is 2%.Applied
- A daily GARCH(1,1) has ω = 0.000002, α = 0.08 and β = 0.90.Applied
- A GARCH(1,1) has α+β = 0.98.Applied
- With the GARCH(1,1) above (ω = 0.000002, α = 0.08, β = 0.90), yesterday’s…Applied