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Exercise

Comovement between predicted vol and VaR

The value-at-risk plots shows substantial time-variation in the downside risk. This time-variation is mostly driven by the time-variation in the return volatility. In this exercise, you will verify that this is the case for the daily Microsoft returns by plotting in one figure both the 5% value-at-risk and the estimated volatility. The object garchroll holding the output of a rolling GARCH estimation is already available to you in the console.

Instructions

100 XP
  • Obtain the data frame with mean and volatility predictions from garchroll.
  • Use the appropriate method method to extract the 5% VaR from garchroll .
  • Extract the volatility from garchpreds.
  • Analyze the comovement in a time series plot.