Suppose that ut follows the ARCH process, a. Let E(ut2) = var(ut) be the unconditional variance of
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a. Let E(ut2) = var(ut) be the unconditional variance of ut. Show that var(ut) = 2.
b. Suppose that the distribution of ut conditional on lagged values of ut is N(0, σ2t). If ut-1 = 0.2, what is Pr(-3 ‰¤ ut ‰¤ 3)? If μt-1 = 2.0, what is Pr(-3 ‰¤ ut ‰¤ 3)?
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
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Related Book For 
Introduction to Econometrics
ISBN: 978-0133595420
3rd edition
Authors: James H. Stock, Mark W. Watson
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