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Using GARCH (1,1) Approach to Estimate Volatility

⚠️Risk ManagementAugust 17, 2012 · 1 min read

This video provides an introduction to the GARCH approach to estimating volatility, i.e., Generalized AutoRegressive Conditional Heteroskedasticity.

GARCH is a preferred method for finance professionals as it provides a more real-life estimate while predicting parameters such as volatility, prices and returns.

GARCH(1,1) estimates volatility in a similar way to EWMA (i.e., by conditioning on new information) except that it adds a term for mean reversion. It says the series is “sticky” or somewhat persistent to a long-run average.

This video is developed by David from Bionic Turtle.