January 2020
Beginner to intermediate
432 pages
11h 24m
English
Content preview from Python for Finance Cookbook
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How to do it...
Execute the following steps to estimate the GARCH(1,1) model in Python.
- Specify the GARCH model:
model = arch_model(returns, mean='Zero', vol='GARCH', p=1, o=0, q=1)
- Estimate the model and print the summary:
model_fitted = model.fit(disp='off')print(model_fitted.summary())
This results in the following screenshot:
- Plot the residuals and the conditional volatility:
model_fitted.plot(annualize='D')
In the plots shown below, we can observe the effect of including the extra component (lagged conditional volatility) into the model specification:
When using ARCH, the conditional volatility series exhibits many spikes, and ...
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