Show that the GARCH(1,1)-process x t , defined by? with independent and identically distributed innovations z t

Question:

Show that the GARCH(1,1)-process x_t, defined by?

with independent and identically distributed innovations z_t ? N(0, 1), is not a Markov-process.

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A First Course in Quantitative Finance

ISBN: 978-1108419574

1st edition

Authors: Thomas Mazzoni

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Question Posted: Feb 19, 2020 10:12 AM

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Show that the GARCH(1,1)-process x t , defined by? with independent and identically distributed innovations z t

Question:

X, = Vh,z, h; = w + ax_, +Bh;-1, + Bh1-1

Step by Step Answer:

A stochastic process is said to be a Markov process if the future evolution of the process depends o...View the full answer

A First Course in Quantitative Finance

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