A Closer Look at the Relation between GARCH and Stochastic Autoregressive Volatility

Abstract

We show that, for three common SARV models, fitting a minimum mean square linear filter is equivalent to fitting a GARCH model. This suggests that GARCH models may be useful for filtering, forecasting, and parameter estimation in stochastic volatility settings. To investigate, we use simulations to evaluate how the three SARV models and their associated… (More)

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