[R] how to fit GJR-GARCH model in R

[saikat sarkar]

If I understand correct then

garch.gjr <- function(par,y,iterate=TRUE)

{

T<-length(y)
mu0<-par[1]
a0<-par[2]
a1<-par[3]
a2 <-par[4]
b1 <- par[5]

e <- s2 <- numeric(T)
s2[1] <- var(y) 
e[1] <- y[1]-mu0 
l<-0

for(t in 2:T)
{
  e[t] <- y[t]-mu0
  s2[t] <- a0+a1*e[t-1]^2+b1*s2[t-1] + ifelse(e[t-1]<0, a2*e[t-1]^2, 0)
  l <- l -0.5*log(2*pi*s2[t])-0.5*e[t]^2/s2[t]

  if(s2[t]>10000) return(10000)

}

if(iterate) return(-l)
 else return(list(loglik=l,sig2=s2,res=e/sqrt(s2)))
}

y<-data
par0<-c(0,0.038,0.051,0.058,0.991)
# you need to put good initial parameter values 
a<-nlm(garch.gjr,par0,y=y,hessian=TRUE) 
se <- sqrt(diag(solve(a$hessian)))


Hope this might help you



Fan Steven wrote:
> 
> Hi,All,
> 
> I am trying to fit a GJR-GARCH model in R:
> 
> r_t = mu + e_t
> h_t = alp_0 + alp_1 * e_(t-1)^2 + alp_2 * s_(t-1) * e_(t-1)^2 + beta *
> h_(t-1)
> 
> where r_t = return (on day t), h_t = conditional volatility on day t,
> and s_(t-1) = 1 if e_(t-1) < 0 (zero otherwise). 
> 
> I have downloaded the packages "tseries" and "fSeries" but can not see
> how to fit this model.
> 
> Any help would be very much appreciated.
> 
> Thanks,
> 
> Steven
> 
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