Show that the GARCH (1,1) model in equation (23.9) is equivalent to the stochastic volatility model where
Question:
Show that the GARCH (1,1) model
in equation (23.9) is equivalent to the stochastic volatility model
where time is measured in days and is the square of the volatility of the asset price and
What is the stochastic volatility model when time is measure in years?
Transcribed Image Text:
= @+au + Bo n-1 dV = a(V, –V)dt +¿V dz
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Answer rating: 58% (12 reviews)
so that The variable has a mean of and a variance of The stan...View the full answer
Answered By
Danish Sohail
My objective is to become most reliable expert for clients. For last 10 years I have been associated with the field of accounting and finance. My aim is to strive for best results and pay particular attention to client needs. I am always enthusiastic to help clients for issues and concerns related to business studies. I can work on analysis of the financial statements, calculate different ratios and analysis of ratios. I can critically evaluate stock prices based on the financial analysis and valuation for companies using financial statements of the business entity being valued with use of excel tools. I have expertise to provide effective and reliable help for projects in corporate finance, equity investments, financial accounting, cost accounting, financial planning, business plans, marketing plans, performance measurement, budgeting, economic research, risk assessment, risk management, derivatives, fixed income investments, taxation, auditing, and financial performance analysis.
4.80+
78+ Reviews
112+ Question Solved
Related Book For
Question Posted:
Students also viewed these Corporate Finance questions
-
In Chapters 2 (Section 2.8) and 3 (Section 3.7) we analyzed the risk and return of the Orange County portfolio, using the building blocks of zero coupon bonds and duration in this exercise, we...
-
Show algebraically that Equation 14.2: Is equivalent to Equation14.1: Sales Variable costs EBIT DOL at X EBIT/EBIT DOL at XASales/Sales
-
1. A stock sells at $15 per share. (a) What is the EPS for the company if it has a P/E ratio of 20? (b) If the companys dividend yield is 3 percent, what is its dividend per share? (c) What is the...
-
In order to evaluate lim f(a+h)-f(), it is necessary to evaluate f(a + h). h xa For f(x) = x 3, f(a+h) =
-
In an experiment in space, one proton is held fixed and another proton is released from rest a distance of 2.50 mm away. (a) What is the initial acceleration of the proton after it is released? (b)...
-
We argued in this chapter that the entropy of the cosmic black body radiation has not changed with time because the number of photons in each mode has not changed with time, although the frequency of...
-
The three bars are made of A-36 steel and form a pinconnected truss. If the truss is constructed when T 1 = 50F, determine the vertical displacement of joint A when T 2 = 150F. Each bar has a...
-
The chairman of the board of directors of the company for which you are chief accountant has told you that he has little use for accounting figures based on cost. He believes that replacement values...
-
Law is a pervasive part of our lives; regulations shape our daily activities, govern our interactions with one another and our relationships to the planet and to other nations. Often our legal...
-
A scientist is rolling a die which has six possible outcomes. He is comparing the expected values of each number to see if the die is equally weighted. The Chi-squared value of his experiment is...
-
Suppose that the current daily volatilities of asset X and asset Y are 1.0% and 1.2%, respectively. The prices of the assets at close of trading yesterday were $30 and $50 and the estimate of the...
-
What is the difference between the exponentially weighted moving average model and the GARCH(1,1) model for updating volatilities?
-
The following transactions of San Jose Pharmacies occurred during 2024 and 2025: Journalize the transactions in San Jose Pharmacies general journal. Explanations are not required. Round to the...
-
A typical loaded commercial jet airplane has an inertia of \(2.1 \times 10^{5} \mathrm{~kg}\). (a) Based on the time intervals involved, which do you expect to require more energy: getting the plane...
-
A \(5.0-\mathrm{kg}\) red book is suspended from a spring attached to the ceiling of an elevator that is accelerating downward. Attaching the book causes the spring to stretch \(71 \mathrm{~mm}\)...
-
Two blocks are hung by a string draped over a pulley, a \(1.0-\mathrm{kg}\) block on the left and a \(3.0-\mathrm{kg}\) block on the right. The two blocks start out at rest and at the same height....
-
Estimate the impulse delivered by a hammer to a nail being driven into a wood plank.
-
You lean out of your dorm window, which is \(12 \mathrm{~m}\) above the ground, and toss a \(0.12 \mathrm{~kg}\) ball up to a friend at a window \(11 \mathrm{~m}\) above you. (a) What is the slowest...
-
The following table lists the total revenue for each of a few selected companies for the year 2014 Company Revenue for Fiscal Year 2014 (millions of dollars) Walmart...
-
Which of the following statements is false? a. Capital leases are not commonly reported in a Capital Projects Fund. b. A governmental entity may report a Capital Project Fund in one year but not the...
-
What does the calibration of a one-factor term structure model involve?
-
Use the DerivaGem software to value 1 4, 2 3, 3 2, and 4 1 European swap options to receive fixed and pay floating. Assume that the one, two, three, four, and five year interest rates are 6%,...
-
Prove equations (32.15), (32.16), and (32.17).
-
Describe the impact of Non-Uniform Memory Access (NUMA) on an operating system's memory management strategies, and how an OS can optimize performance in a NUMA-based hardware environment .
-
Explain the concept of system calls in operating systems, and discuss the security implications of exposing system-level operations to user space.
-
Rafner Manufacturing has the following budgeted data for its two production departments. Budgeted Data Assembly Overhead cost $ 1,560,000 $ 1,035,000 Direct labor hours Machine hours 13,000 direct...
Study smarter with the SolutionInn App