Mastering Volatility Modeling: Insights from ARCH and GARCH to Risk Forecasting
A Comprehensive Guide to Understanding and Applying Advanced Time Series Analysis Techniques in Finance
ARCH and GARCH models are used to model nonconstant conditional variance in time series data.
While ARIMA models assume a constant conditional variance, Autoregressive Conditional Heteroskedasticity (ARCH) explicitly models the change in variance (volatility) over time. ARCH(1) is the simplest GARCH model, and Generalized Autoregressive Conditional Heter…