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Neparametrický heuristický přístup k odhadu modelu GARCH-M a jeho výhody
[Estimating a GARCH-M Model by a Non-Parametric Heuristic Method and Its Advantages]

Author

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  • Jaromír Kukal
  • Tran Van Quang

Abstract

The models from the GARCH family are often estimated by maximum likelihood method, either parametrically or non-parametrically. Since the parametric estimation procedure is based on an a priori distribution, its misspecification can lead to the inconsistency of the estimators. Therefore non-parametric approach, in which both model's parameters and the distribution of error terms are estimated from the data, seems to be a better alternative. In our work, we propose a non-parametric technique with the use of a heuristic called differential evolution to estimate the parameters of a GARCH-M model. This technique can more likely reach to a global solution of maximum likelihood estimation (MLE) task. Further, it can also more effectively control the required properties of the estimates. The suitability of our approach is verified on modeling the CZK/USD and CZK/EURO forward exchange rate premium of period from 2007 to 2012 by a GARCH-M model.

Suggested Citation

  • Jaromír Kukal & Tran Van Quang, 2014. "Neparametrický heuristický přístup k odhadu modelu GARCH-M a jeho výhody [Estimating a GARCH-M Model by a Non-Parametric Heuristic Method and Its Advantages]," Politická ekonomie, Prague University of Economics and Business, vol. 2014(1), pages 100-116.
    • Handle: RePEc:prg:jnlpol:v:2014:y:2014:i:1:id:939:p:100-116
    DOI: 10.18267/j.polek.939
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    Cited by:

    1. Josef Arlt & Martin Mandel, 2019. "Determinanty forwardového kurzu a role rizikových prémií (příklad měnových párů czk/eur a czk/usd) [Determinants of Forward Exchange Rate and the Role of Risk Premiums (Case of CZK/EUR and CZK/USD ," Politická ekonomie, Prague University of Economics and Business, vol. 2019(5), pages 476-489.

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    More about this item

    Keywords

    GARCH-M model; Non-parametric method; heuristic; forward risk premium;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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