The extremal index for GARCH(1,1) processes with t-distributed innovations
Generalised autoregressive conditional heteroskedastic (GARCH) processes have wide application in financial modelling. To characterise the extreme values of this process the extremal index is required. Mikosch and Starica (2000) derive the extremal index for the squared GARCH(1,1) process. Here we propose an algorithm for the evaluation of the extremal index and for the limiting distribution of the size of clusters of extremes for GARCH(1,1) processes with t-distributed innovations, and tabulate values of these characteristics for a range of parameters of the GARCH(1,1) process. This algorithm also enables properties of other cluster functionals to be evaluated.
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|Date of creation:||2006|
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EERI Research Paper Series
EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
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