Here is the final part of the series of posts on the volatility modelling where I will briefly talk about one of the many variant of the GARCH model: the exponential GARCH (abbreviated EGARCH). I chose this variant because it improves the GARCH model and better model some market mechanics. In the GARCH post, I […]
As promised in last post, we will look at a popular implementation of the GARCH(1,1) model: the value-at-risk. I chose this implementation because it is used quite often in academic literature and for its educational purpose. The value-at-risk, also abbreviated VaR, is a measure of the risk for a portfolio. To recap, the 1 percent […]
As request by several readers in light of the previous series of post on using GARCH(1,1) to forecast volatility, here is a very basic introduction post on two models widely used in finance: the GARCH and EGARCH. One of the great tools of statistics used in finance is the least square model (not exclusively the […]
Continuing on the current series of post, I was at the point of forecasting volatility. There is several ways to just that; this very topic is the subject of a lot of research in finance. Different models to model volatility are available and they range from both ends of the complexity spectrum. I am going […]
It is in the human nature to seek the path of least resistance. While this might be good in some instances, when dealing with my capital I usually try to keep it simple but I try to always steer clear from intellectual laziness. Many top tier bloggers have mentioned the traps of assumptions and the […]
In the same line of thoughts as last post, today we will look at a way to incorporate the GARCH volatility model we introduced yesterday to create a regime switching strategy. It is often discussed on the blogosphere that high volatility is good for daily MR, see previous editions of the state of short-term mean-reversion […]
