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Normal vs leptokurtic distribution for financial returns
Financial returns have been shown to follow leptokutotic distributions, however volatility forecasting models like EWMA and DCC-GARCH assume conditionally (dependent on time) Normal distribution for ...
- 73
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votes
1
answer
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Dealing with shape parameter of standardized skew normal distribution in DCC-GARCH
Say we have a GARCH(1,1) equation such as
$h_t = \omega + \alpha\varepsilon^2_{t-1} + \beta h_{t-1}$
and $\varepsilon_{t-1}$ follows a standardized skew normal distribution. Using MLE we get the ...
- 109