3. Include the option implied volatility VIX series from the Chicago Board Options Exchange (CBOE) as an

Question:

3. Include the option implied volatility VIX series from the Chicago Board Options Exchange

(CBOE) as an explanatory variable in the GARCH equation. Use MLE to estimate

2t C1 D !C .Rt ????t/

2 C2t C VIX2 t =252; with Rt D tzt; and zt N.0;1/

Set starting values to D 0:04; D 0:5; ! D 0:000005; D 2; and D 0:07.

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