Hello Everybody
I am posting here because I think I have a problem with performing a simulation
with the rugarch package in R.
I want to simulate a mean model consisting of a half variance and a variance
model equal to the Garch (1,1) model, but I do not think the ugarchsim function
take into consideration the half variance in the mean model automatically. Is
that correct? If thats the case what do I I have to do to get it correct? The
reason for it is that the simulated values is far to big to be correct. The
mean model is:
r_t = u -0.5sigma_t + epsilon_t
and the variance equation is:
sigma^2_t = w + a*epsilon_t + b*sigma^2_t-1.
The specification with the ugarchspec:
garch11_spec <- ugarchspec( variance.model=list(model="sGARCH",
garchOrder=c(1,1)),mean.model=list(armaOrder=c(0,0), include.mean=T, archm=T,
archpow=2 ) , distribution.model="norm",start.pars = list(), fixed.pars =
list(archm=-0.5))
and this is fitted with the ugarchfit function where r.xts is the data object:
garch11_fit <- ugarchfit(garch11_spec, r.xts, fit.control = list(stationarity =
1, fixed.se = 1))
The possible "problem child" is specified as follows:
garch11_sim <- ugarchsim(garch11_fit, n.sim = 4516, n.start = 0, m.sim = 10000,
startMethod = "unconditional", rseed = 123) names(garch11_sim@simulation)
I have tried to look for help in the documentation for the package and in the
package vignette without success, so all help would be appreciated.
Greetings
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