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I estimates FIGARCH model using rugarch package. While model specification by the function ugarchspec, one of its argument is distribution.model that specifies the conditional density to use for the innovations. By the theory, the innovations needs to have zero mean and unit variance, so need to be standardized.

So my question is, whether setting the argument to the values "norm" or "std" corresponds to the standardized normal and standardized Student-$t$ distribution?

The R code below:

figarch_spec  = ugarchspec(variance.model=list(model="fiGARCH", garchOrder=c(1,1)),
                        mean.model=list(armaOrder=c(0,0), include.mean=FALSE),
                        distribution.model="norm")
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Yes, the distributions are always standardized to have zero mean and unit variance. For details, see section 2.3. Conditional Distributions in the vignette of the rugarch package (starting from p. 16).

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  • $\begingroup$ thank you very much! $\endgroup$ Sep 20, 2020 at 15:54
  • $\begingroup$ @DominikaKollárová, you are welcome! $\endgroup$ Sep 20, 2020 at 17:12

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