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  3. GARCH Models in Python

Exercise

Implement a basic GARCH model

In this exercise, you will get familiar with the Python arch package, and use its functions such as arch_model() to implement a GARCH(1,1) model.

First define a basic GARCH(1,1) model, then fit the model, review the model fitting summary, and plot the results.

The data to use S&P 500 price return data has been preloaded as sp_data. Also the arch package has been imported for you.

Instructions 1/2

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  • Define a GARCH(1,1) model basic_gm with 'constant' mean and 'normal' distribution of the residuals.
  • Fit the model basic_gm.