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Unformatted text preview: ARCH(1) process (autoregressive conditional heteroscedastic) and h t is called volatility . The conditional variance of an ARCH(1) process { Z t } depends on time V ( Z t  Z t1 , Z t2 , . . . ) = ν + φ 1 Z 2 t1 , but the conditional variance is still constant V ( Z t ) = ν 1 − φ 1 . 10.3 Extensions The GARCH model (generalised ARCH) is h t = ν + φ 1 Z 2 t1 + φ 2 Z 2 t2 + · · · + φ m Z 2 tm + δ 1 h t1 + δ 2 h t2 + · · · + δ r h tr . The EGARCH model (exponential GARCH) is log( h t ) = ν t + ∞ s j =1 π j { V tj  − E (  V tj  ) + XV tj } ....
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 Spring '09
 jsdkasj
 Probability theory, Autoregressive conditional heteroskedasticity, conditional variance, zt, Finance and Econometrics

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