Page 1 of 1
How do I use GARCH to get a pre-determined output volatility?
Posted: December 21st, 2005, 9:40 pm
by Osas
Given series1(with monthly volatility, x%) and series2, where series2 is calculated as an hourly GARCH basis from series1. How can I use GARCH to simulate series2 so that series2 has a monthly volatility that is (x+c)%, where c is a constant? How would I use calculate the appropriate parameters? Also, note that the GARCH is applied hourly while the required volatility is monthly.
How do I use GARCH to get a pre-determined output volatility?
Posted: December 22nd, 2005, 12:11 am
by jomni
have you tried to use the time scaling equation?vol * sqrt (time)hourly vol * sqrt (24 x 30) <hours x days>Of course why not compute for monthly vol by using series 1 in the first place?
How do I use GARCH to get a pre-determined output volatility?
Posted: December 22nd, 2005, 2:42 pm
by Osas
Im also trying to I find a relationship between the monthly vols(that I want series 2), and he variance parameters used by GARCH. GARCH(1,1) uses a long-term variance as input. I guess there is a way to transform this variance into a vol. But how to I transform the other GARCH input parameters to suit this vol? Would I just ignore these parameters? Or would I have to tune them to fit some desired correlation?Thanks.