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- 4/26/10
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Hi guys, I am new here and wanted to ask you how do we estimate the coefficients c,d,w,a,b of an AR(1)-GARCH(1,1)? Is it that we first run an MLE estimator for the c and d and then continue with the GARCH process or something else? If possible add the derivatives as well.
We have a process:
y(t) = c + d*y(t-1) + e(t),
h(t) = w+a*e(t)^2 + b*h(t)^2,
We got the log-likelihood function with is:
sum(-0.5*ln(2pi)) -sum(0.5*ln(h(t)^2))-sum(0.5*e(t)^2/h(t)^2))
where e(t) = y(t)-c-d*y(t-1)
Thanks a lot!!
PS: Mods change the post to any appropriate section
We have a process:
y(t) = c + d*y(t-1) + e(t),
h(t) = w+a*e(t)^2 + b*h(t)^2,
We got the log-likelihood function with is:
sum(-0.5*ln(2pi)) -sum(0.5*ln(h(t)^2))-sum(0.5*e(t)^2/h(t)^2))
where e(t) = y(t)-c-d*y(t-1)
Thanks a lot!!
PS: Mods change the post to any appropriate section