GARCH 101; The Use of ARCH/GARCH Models in Applied Econometrics

摘要

ARCH and GARCH models have been applied to a wide range of time series analyses, but applications in finance have been particularly successful and have been the focus of this introduction. Financial decisions are generally based upon the trade of between risk and return; the econometric analysis of risk is therefore an integral part of asset pricing, portfolio optimization, option pric- ing and risk management. This paper has presented an example of risk mea- surement that could be the input to a variety of economic decisions.