Volatility

Lecture 2a - Time series and ARCH 

Lecture 2b - ARCH models: MLE/QMLE estimation, testing and forecasting

Lecture 3 - GARCH models and extensions (the GARCH "zoo")

Lecture 4 - Multivariate GARCH models

Lecture 5 - Stochastic Volatility and Realized Volatility

Lecture 6 - Replication of Engle and Patton (2001)

Readings:

You should read the paper by Rob Engle "GARCH 101" before the first practice lecture. 

Engle, R.F., (2001), "GARCH 101: The Use of ARCH/GARCH Models in Applied Econometrics", Journal of Economic Perspectives, 15(4), 157-168

For lecture 1 you should read Engle (AER, 2004)

Engle, R.F., (2004), "Risk and Volatility: Econometric Models and Financial Practice'', American Economic Review, 94(3), 405-425

For lecture 2 read Engle (JAE, 2002) "New Frontiers in ARCH models" 

Engle, R.F., (2002). "New Frontiers for ARCH", Journal of Applied Econometrics, 17, 425-446.

You should also read 

Bollerslev, T. (2009), "Glossary of (G)ARCH"

Practice Lectures

Data and Instructions for practice lecture by Natalia Merkusheva

#1 and #2

Data for Engle's (2001) GARCH 101 paper

Readme file with instructions to replicate Engle's (2001) GARCH 101 paper

R program and readme file

Matlab program and readme file

#3

Data for Engle's (2004) Nobel lecture paper (data on S&P 500 from 12/31/1963 through 2/9/2010 and new VIX from 1/2/90 through 2/9/2010)

Homework #1 (due Fri. April, 23)

The deadline for the homework has been postponed to Friday, April 23!

1) Referee report

    Pick one paper from the list below. You can discuss the paper you choose with your colleagues but I want you to write your own referee report (remember: at most 2 pages), where you summarize the main ideas of the paper and your suggestions. You can use the following instruction file.

    Instructions: How to write a report

    Pick one of the following papers:

    Awartani and Corradi, (2005), "Predicting the volatility of the S&P 500 stock index via GARCH models: the role of asymmetries", International Journal of Forecasting, 21 167-183.

    Martens, (2002), "Measuring and Forecasting S&p 500 Index-Futures Volatility using High-Frequency data", Journal of Futures Markets, 22, 497-518

    Andersen and Bollerslev, (1998), "Answering the Skeptics: Yes, Standard Volatility Models do Provide Accurate Forecasts", International Economic Review, 39, 885-905.

    Andersen, Bollerslev and Meddahi, (2004), "Analytical Evaluation of Volatility Forecasts", International Economic Review, 45, 1079-1110.

    Hansen and Lunde, (2005), "A Forecast Comparison of Volatility Models; Does Anything Beat a GARCH(1,1)?" Journal of Applied Econometrics, 20, 873-889.

    Brownlees and Gallo (2008), "Comparison of Volaitlity Measures: a Risk Management Perspective", University of Florence working paper 2008/3

   Engle, Gallo and Velucchi, (2008), "A MEM-based Analysis of Volatility Spillovers in East Asian Financial Markets", University of Florence working paper 2008/09

    Engle and Gallo, (2006), "A Multiple Indicators Model for Volatility using intra-daily Data", Journal of Econometrics, 131, 3-27.

    Pakel, Shephard and Sheppard, (2009), "Nuisance parameters, composite likelihoods and a panel of GARCH models", University of Oxford working paper.

    Engle, Shepard, Sheppard, (2008), "Fitting vast dimensional time-varying covariance models", University of Oxford working paper

    Patton, (2008) "Volatility Forecast Comparison using Imperfect Volatility Proxies", forthcoming in the Journal of Econometrics

    Andersen and Bollerslev (1997), Intraday periodicity and volatility persistence in financial markets, Journal of Empirical Finance, 4, 115-158.

    Andersen, Bollerslev, Diebold and Labys, (2003), "Modeling and Forecasting Realized Volatility", Econometrica, 71, 579-625

    Andersen, Bollerslev, Diebold and Ebens, (2001), "The distribution of realized stock return volatility", Journal of Financial Economics, 61, 43-76

    Andersen, Bollerslev, Diebold and Labys, (20031, "The distribution of realized exchange rate volatility", Journal of the American Statistical Association, 96, 42-55

    Andersen, Bollerslev, and Lange , (1999), "Forecasting financial market volatility: sample frequency vis-a-vis forecast horizon" Journal of Empirical Finance, 6, 457-477.

2) Empirical Exercise

   Instructions

    Paper to replicate:

    Engle and Patton, (2001) "What good is a volatility model?", Quantitative Finance, 1(2), 237-245.

    Data