[R-SIG-Finance] Question about garchSim and garch

[Spencer Graves]

I got only one hit for

      RSiteSearch("egarch", "fun")

That was for GarchOxInterface {fGarch}

      Spencer

tom soyer wrote:
> Thnaks Spencer. I am glad I am not the only one that find garch 
> strange. I guess I will give up on it too. It seems that garchFit and 
> garchSim are very good. They have been giving me good results so far.
>  
> Thanks for the tip on how to specify arma + garch model. I found this 
> paper also very 
> helpful:http://www.itp.phys.ethz.ch/econophysics/R/pdf/garch.pdf.
>  
> Do you know how to specify arma + egarch model in R? Is it even 
> possible in R without installing Ox?
>
>  
> On 2/2/08, *Spencer Graves* <spencer.graves at pdf.com 
> <mailto:spencer.graves at pdf.com>> wrote:
>
>     Hi, Tom:
>
>          The file 'scripts\ch03.R' in the FinTS package includes a brief
>     description of attempts to use garch{tseries} and garchFit{fGarch}.  I
>     don't understand either function very well, but I got answers from
>     'garchFit' that seemed to match some of the published results in Tsay;
>     I gave up on 'garch'.
>
>          Since 'garchSim' and 'garchFit' are both in 'fGarch', I would
>     expect that it should be moderately easy to simulate something,
>     plot the
>     result, and see for yourself.  Chapter 3 of Tsay (2005) gives a
>     reasonable overview of GARCH and related models with several examples.
>     The companion script\ch03.R is far from complete but might help.
>
>          You may find the following example from 'ch03.R' of interest:
>
>     library(FinTS)
>     data(sp500)
>     library(fGarch)
>     spFit30.11 <- garchFit(sp500~arma(3,0)+garch(1,1), data=sp500)
>
>          This specifies an arma(3,0) mean model with garch(1,1) noise.
>     This syntax is buried in the 'garchFit' help page.
>
>          Hope this helps.
>          Spencer
>
>     tom soyer wrote:
>     > Hi,
>     >
>     > I am new to GARCH and I am trying to figure out how to use R's
>     garchSim and
>     > garch, and I am a bit confused. I am hopeing that R finance
>     experts can help
>     > me understand them better. If we look at the definition of
>     GARCH(1,1),
>     > there should be two equations:
>     > [1]: Y(t) = c + e(t), and
>     > [2]: sigma^2(t) = a0 + a1*e^2(t-1) + b1*sigma^2(t-1)
>     >
>     > So, I would expect any garch simulation function to four
>     parameters: c, a0,
>     > a1, and b1. But take a look at the garchSim, it has only three
>     parameters:
>     > model = list(omega = 1.0e-6, alpha = 0.1, beta = 0.8). I assume
>     here that
>     > omega = a0 in [2], alpha=a1, and beta=b1. If so, then it seems
>     that in
>     > garchSim, c, the constant (or the mean) in [1], is always
>     assumed to be
>     > zero. Does anyone know if this is true? I just want to make sure
>     that I
>     > understand exactly what I should expect from the output of the
>     garchSim
>     > function.
>     >
>     > Also, I have a similar question about garch. It seems that the
>     coefficients
>     > estimated by garch(x,order=c(1,1)) are a0, a1, and b1. Like
>     garchSim, there
>     > is no c, the mean. So does this mean garch also assumes zero
>     mean and thus
>     > actually fits model [2] instead of both [1] and [2]?
>     >
>     > Thanks!
>     >
>     >
>
>
>
>
> -- 
> Tom