Volatility: GARCH 1,1 (FRM T2-23)

[my xls is here trtl.bz/2t794bU] The GARCH(1,1) volatility estimate shares a similarity to EWMA volatility: both assign greater (lesser) weight to recent (distant) returns. But the GARCH(1,1) has an additional feature: it models a long-run (aka, unconditional) variance toward which the volatility series is pulled. Discuss this video here in our forum: trtl.bz/2YMnNWZ
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[@hai.1820]

After seeing the second video on this topic, I started to get a light grasp! THank you so much for clearly explaining this!

[@finansalmodeller3468]

Super clear! Thanks a lot admin

[@bionicturtle]

Thank you for watching!

[@bartas8891]

Thanks David ! good explanation as always.

[@samrathore9396]

Superb, as usual

[@bluehorseshoe444]

Why are the formulas in the 'D' column inconsistent? In the 'D9' cell, you divide current day by the previous day, but in all subsequent cells, you divide previous by current

[@fffabiofigueiredo]

Its possible to share this spreadsheet? I dont understand what isthe 0.880348% means... its the cel S73 and isnt possible to see... Thank you!

[@bionicturtle]

A link to the spreadsheet is found in the description, at the beginning; ie, the XLS is at trtl.bz/2JQufJy . I calculated 0.880348% by applying the "tedious" GARCH(1,1) on the previous day, σ^2(n-1). Thanks!

[@m.r.5855]

Thx for the great explanation. There seems to be a typo in the xls. It seems only the first relative (cell D9) is correct - the others are calculated as S(i-i)/Si.

[@bionicturtle]

Yes, you are totally correct ... such that the prior returns are negatives of those shown (e.g., -1.63% rather than 1.63%). Although because the first is correct, and the squared-returns are identical, it turns out to have no impact on the rest of the results! But you are still totally correct, great observation ...

[@abenaokromea]

Awesome video. Thank you!

[@AkshatPande92]

Please throw more light on the Long Run Variance. Will it be given directly to us on the FRM exam?

[@haminajafi224]

That's my question too.

[@LinhNguyen-ih1zl]

Can I use GARCH (1,1) for portfolio returns, or GARCH (1,1) just applicable for a single security returns?

[@noname_whatsoever]

Amazing again. Thanks!

[@devonk298]

great!

[@bionicturtle]

Thank you for watching!

[@clarence5965]

Question might be kind of dumb, how did you obtain the volatility for the day prior at 12:35

[@clarence5965]

nvm i watched the the how to calculate historical vol video.

[@felipegirardi4379]

I have the same question

[@BettyDavenport-k3w]

O'Keefe Squares

[@SphereofTime]

6:34

[@joaquimazevedo3679]

How can I calculate the long run variance?

[@akibnizamify]

Please someone answer

[@jrfabian]

@@akibnizamify Using eviews i think

[@NobukoPasquarelli-q9q]

Gusikowski Lock