Question: Estimate a GARCH 1 1 for the S P 500 index using data
Estimate a GARCH(1,1) for the S&P 500 index, using data from January 1999 to December 2003.
Answer to relevant QuestionsReplicate the GARCH(1,1) estimation in Example 24.2, using daily returns from on IBM from January 1999 to December 2003. Compare your estimates with and without the four largest returns. a. What is the 1-year bond forward price in year 1? b. What is the price of a call option that expires in 1 year, giving you the right to pay $0.9009 to buy a bond expiring in 1 year? c. What is the price of an otherwise ...Suppose that the yield curve is given by y(t) = 0.10 − 0.07e −0.12t , and that the short-term interest rate process is dr(t) = (θ(t) − 0.15r(t)) + 0.01dZ. Compute the calibrated Hull-White tree for 5 years, with time ...Suppose the yield curve is flat at 6%. Consider a 4-year 5%-coupon bond and an 8-year 7%-coupon bond. All coupons are annual. a. What are the prices and durations of both bonds? b. Consider buying one 4-year bond and ...Using the same assumptions as in Problem 26.12, compute the 10-day 95% VaR for a claim that pays $3m each year in years 7–10. In Problem 26.12 Suppose the 7-year zero-coupon bond has a yield of 6% and yield volatility of ...
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