# GARCHM_FORESD - Volatility Forecast of GARCH-M Model

(deprecated) Calculates the estimated error/standard deviation of the conditional mean forecast.

## Syntax

GARCHM_FORESD(X, Sigmas, Order, mean, lambda, alphas, betas, T, Local)

X is the univariate time series data (a one dimensional array of cells (e.g. rows or columns)) of the last p observations.

Sigmas is the univariate time series data (a one dimensional array of cells (e.g. rows or columns)) of the last q realized volatilities.

Order is the time order in the data series (i.e. the first data point's corresponding date (earliest date=1 (default), latest date=0)).

Order Description
1 ascending (the first data point corresponds to the earliest date) (default)
0 descending (the first data point corresponds to the latest date)

mean is the GARCH-M model mean (i.e. mu).

lambda is the volatility coefficient for the mean. In finance, lambda is referenced as the risk premium.

alphas are the parameters of the ARCH(p) component model (starting with the lowest lag).

betas are the parameters of the GARCH(q) component model (starting with the lowest lag).

T is the forecast time horizon (expressed in terms of steps beyond the end of the time series X). If missing, t=1 is assumed.

Local is the type of desired volatility output (0=Term Structure, 1=Local Volatility). If missing, local volatility is assumed.

## Remarks

1. The underlying model is described here.
2. Warning: GARCHM_FORESD() function is deprecated as of version 1.63: use GARCHM_FORE function instead.
3. The time series is homogeneous or equally spaced.
4. The time series may include missing values (e.g. #N/A) at either end.
5. The number of parameters in the input argument - alpha - determines the order of the ARCH component model.
6. The number of parameters in the input argument - beta - determines the order of the GARCH component model.

## Examples

Example 1:

 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
A B C D
Date Data
January 10, 2008 -2.827 GARCH-M(1,1)
January 11, 2008 -0.947 Mean -0.076
January 12, 2008 -0.877 Lambda 0.145
January 14, 2008 1.209 Alpha_0 0.593
January 13, 2008 -1.669 Alpha_1 0.000
January 15, 2008 0.835 Beta_1 0.403
January 16, 2008 -0.266
January 17, 2008 1.361
January 18, 2008 -0.343
January 19, 2008 0.475
January 20, 2008 -1.153
January 21, 2008 1.144
January 22, 2008 -1.070
January 23, 2008 -1.491
January 24, 2008 0.686
January 25, 2008 0.975
January 26, 2008 -1.316
January 27, 2008 0.125
January 28, 2008 0.712
January 29, 2008 -1.530
January 30, 2008 0.918
January 31, 2008 0.365
February 1, 2008 -0.997
February 2, 2008 -0.360
February 3, 2008 1.347
February 4, 2008 -1.339
February 5, 2008 0.481
February 6, 2008 -1.270
February 7, 2008 1.710
February 8, 2008 -0.125
February 9, 2008 -0.940

Formula Description (Result)
=GARCHM_FORESD($B$2:$B$32,1,$D$3,$D$4,$D$5:$D$6,$D$7,1) Forecasted conditional volatility at T+1, February 10, 2008 (0.9966)
=GARCHM_FORESD($B$2:$B$32,1,$D$3,$D$4,$D$5:$D$6,$D$7,2) Forecasted conditional volatility at T+2, February 11, 2008 (0.9966)
=GARCHM_FORESD($B$2:$B$32,1,$D$3,$D$4,$D$5:$D$6,$D$7,3) Forecasted conditional volatility at T+3, February 12, 2008 (0.9966)