Modeling Time-Varying Unconditional Variance by Means of a Free-Knot Spline-GARCH Model

The book "Spline Functions for Time-Varying Unconditional Variance" uses spline functions to address the problem of time-varying unconditional variance, estimating knots as free parameters in a joined estimation process. Results are tested in simulation and empirical studies.

Format: Paperback / softback
Length: 237 pages
Publication date: 28 July 2022
Publisher: Springer-Verlag Berlin and Heidelberg GmbH & Co. KG

The book delves into the intricate problem of analyzing time-varying unconditional variance in return processes, employing a spline function as a powerful tool. By estimating the knots of these spline functions as free parameters within a comprehensive joint estimation process, along with the parameters of the mean, conditional variance, and spline function, the book aims to address regions where the unconditional variance is not smooth. Extensive simulation studies and an empirical analysis using the S&P500 index are conducted to validate the findings and demonstrate the effectiveness of the proposed method.

The book addresses the problem of a time-varying unconditional variance of return processes utilizing a spline function.

The knots of the spline functions are estimated as free parameters within a joined estimation process together with the parameters of the mean, the conditional variance, and the spline function.

With the help of this method, the knots are placed in regions where the unconditional variance is not smooth.

The results are tested within an extensive simulation study and an empirical study employing the S&P500 index.

Weight: 344g
Dimension: 210 x 148 (mm)
ISBN-13: 9783658386177
Edition number: 1st ed. 2022