After doing these courses, I feel confident creating professional visualizations and dashboards
Shoebur RahmanProcurement Specialist, Giz Bangladesh
Descrizione del corso
Are you curious about the rhythm of the financial market's heartbeat? Do you want to know when a stable market becomes turbulent? In this course on GARCH models you will learn the forward looking approach to balancing risk and reward in financial decision making. The course gradually moves from the standard normal GARCH(1,1) model to more advanced volatility models with a leverage effect, GARCH-in-mean specification and the use of the skewed student t distribution for modelling asset returns. Applications on stock and exchange rate returns include portfolio optimization, rolling sample forecast evaluation, value-at-risk forecasting and studying dynamic covariances.
Prerequisiti
Curriculum
Programma del corso
1
The Standard GARCH Model as the Workhorse Model
We start off by making our hands dirty. A rolling window analysis of daily stock returns shows that its standard deviation changes massively through time. Looking back at the past, we thus have clear evidence of time-varying volatility. Looking forward, we need to estimate the volatility of future returns. This is essentially what a GARCH model does! In this chapter, you will learn the basics of using the rugarch package for specifying and estimating the workhorse GARCH(1,1) model in R. We end by showing its usefulness in tactical asset allocation.
- Analyzing volatility50 XP
- Computing returns100 XP
- Standard deviation on subsamples100 XP
- Roll, roll, roll100 XP
- The GARCH equation for volatility prediction50 XP
- GARCH(1,1) reaction to one-off shocks50 XP
- Prediction errors100 XP
- The recursive nature of the GARCH variance100 XP
- The rugarch package50 XP
- Specify and taste the GARCH model flavors100 XP
- Out-of-sample forecasting100 XP
- Volatility targeting in tactical asset allocation100 XP
2
Improvements of the Normal GARCH Model
Markets take the stairs up and the elevator down. This Wallstreet wisdom has important consequences for specifying a realistic volatility model. It requires to give up the assumption of normality, as well as the symmetric response of volatility to shocks. In this chapter, you will learn about GARCH models with a leverage effect and skewed student t innovations. At the end, you will be able to use GARCH models for estimating over ten thousand different GARCH model specifications.
3
Performance Evaluation
GARCH models yield volatility forecasts which serve as input for financial decision making. Their use in practice requires to first evaluate the goodness of the volatility forecast. In this chapter, you will learn about the analysis of statistical significance of the estimated GARCH parameters, the properties of standardized returns, the interpretation of information criteria and the use of rolling GARCH estimation and mean squared prediction errors to analyze the accuracy of the volatility forecast.
4
Applications
At this stage, you master the standard specification, estimation and validation of GARCH models in the rugarch package. This chapter introduces specific rugarch functionality for making value-at-risk estimates, for using the GARCH model in production and for simulating GARCH returns. You will also discover that the presence of GARCH dynamics in the variance has implications for simulating log-returns, the estimation of the beta of a stock and finding the minimum variance portfolio.
R
GARCH Models in R
Corso
completato
