Answered step by step
Verified Expert Solution
Question
1 Approved Answer
imagine that when using the historical simulation approach for computing VaR, you want to update volatility using garch (1,1). you have 4 assets and therefore
imagine that when using the historical simulation approach for computing VaR, you want to update volatility using garch (1,1). you have 4 assets and therefore 4 time series.
then you link all 4 time series to 1 lambda value instead of 4 time series and 4 lambda values.
Whats wrong with having 1 lambda value per time series instead?
Also,
When is it a good time to have 4 lambda values if we are observing 4 time series?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started