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MMLU / Suppose that we have estimated a GARCH model for daily equity returns, and we…

Problem

Answer published by the source. Consult the official source to check your work against its answer.

question

Suppose that we have estimated a GARCH model for daily equity returns, and we are interested in producing a 10-day forecast of the volatility (measured by the standard deviation of returns) for use in a value at risk model. How could such a forecast most validly be calculated?

choices

  1. Produce 1, 2, 3, ..., 10 step ahead conditional variance forecasts and add them up
  2. Produce 1, 2, 3, ..., 10 step ahead conditional variance forecasts and add them up and take the square root
  3. Produce 1, 2, 3, ..., 10 step ahead conditional variance forecasts, take the square roots of each one and add them up
  4. Produce a 1-step ahead conditional variance forecast, take its square root and multiply it by the square root of 10

subject

econometrics

Discussion

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Source and history

task_id
1e3ad6a4-be67-503a-9cea-7144b9b9e878
task_key
all--test--1e3ad6a4-be67-503a-9cea-7144b9b9e878
task_revision_id
1
config / split
all / test

Official source

initial import