Session Ready
Exercise

A better model for EUR/USD returns

In the previous exercise you have analyzed the statistical significance of the estimated parameters of the AR(1) GJR GARCH model with skewed student t distribution for the daily EUR/USD returns. The conclusion is that we should simplify the GARCH model used. Let's therefore take a constant mean standard GARCH model with student t distribution. We fix the mean value to zero and use variance targeting.

Instructions
100 XP
  • Complete the code to estimate a constant mean standard GARCH model with student t distribution and variance targeting.
  • Use setfixed() to impose that the mean parameter equals 0.
  • Estimate the model.
  • Check visually that these changes lead to a volatility series close to the one using flexgarchfit.