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:

 
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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)

Files Examples

References

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