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GARCH model evaluation: strength and initial values

Grant number: 17/10262-3
Support type:Scholarships in Brazil - Scientific Initiation
Effective date (Start): June 01, 2017
Effective date (End): December 31, 2017
Field of knowledge:Physical Sciences and Mathematics - Probability and Statistics - Statistics
Principal researcher:Luiz Koodi Hotta
Grantee:Sérgio Henrique Andrade de Azevedo
Home Institution: Instituto de Matemática, Estatística e Computação Científica (IMECC). Universidade Estadual de Campinas (UNICAMP). Campinas , SP, Brazil
Associated research grant:13/00506-1 - Time series, wavelets and functional data analysis, AP.TEM


The generalized autoregressive conditional heteroskedasticity (GARCH) model has been the most used model to model volatility series of returns of prices of financial assets. Its popularity is due to the fact that the model can explain the main characteristics of interest found in these series and because its likelihood can be calculated in a simple way, when conditioned to an initial value of the volatility. Therefore, in this approach the maximum likelihood estimator depends on the initial value of the volatility. In the project the student is going to study the GARCH model, maximum likelihood estimators of the GARCH model and use simulation to study properties of estimators. Several choices of the initial value of volatility will be considered and the simulation will be used to study their properties. (AU)

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