[R-SIG-Finance] MAR-ARCH

[Patrick Burns]

Ajay is talking about something different than what you (Dirk)
are and I was talking about.

The latter topic is: how good does my model capture the
financial phenomenon in which I'm interested.

Ajay's topic is: I have a model and at least two implementations
of that model.  I don't care how good it is for interpreting reality,
but what I do care about is if I can say anything about the quality
of the implementations.

Garch is a particularly fertile ground for the second question.  It
is probably somewhat of an exaggeration, but there may be problems
for which you get a unique answer from each implementation you try.
Even for univariate garch(1,1) assuming Gaussian errors.

As for standards on this, Bruce McCullough wrote a paper on garch
implementations, and Dietmar Maringer and Peter Winker wrote a
paper on the difficulty of getting the optimal estimate.

Pat


Dirk Eddelbuettel wrote:

>Hi Ajay,
>
>On 23 October 2007 at 19:47, Ajay Shah wrote:
>| On Tue, Oct 23, 2007 at 09:50:49AM +0100, Patrick Burns wrote:
>| > Comparing estimators is a good idea.  But a good comparison
>| > is more complex than stated.
>| 
>| I'm sorry I was not clear. For starters, I was only after software
>| testing. Does this code replicate the numerical values obtained for
>| standard datasets with standard codes?
>
>Well are there standard datasets and results for volatility estimation?
>
>It's been a (longish) while since I looked closely at this, but isn't
>volatility still an unobservable?  Short of a Monte Carlo study with metrics
>such as the ones suggested by Pat, what do you suggest one looks at?
>Realized vol?  Implied vol?  "Traded" vol from variance or vol contracts?
>
>I'm sure there are good answers to be had for this, so let's hear them :)
>
>Dirk
>
>  
>