On 02/21/2014 02:06 PM, Bastian Offermann wrote:
Dear all,
there is a JSS paper on DEoptim including a Markov Switching GARCH
example . Since the optimizer can only handle box constraints, how would
the standard covariance stationarity condition alpha+beta < 1 in a
simple GARCH(1,1) be included here?
My guess is sth like
foo = function(x) {
...
loglikelihood = ...
if(alpha+beta >= 1) loglikelihood = loglikelihood + penalty
}
I'm not entirely sure your question makes sense.
DEoptim in that case was used to calculate a probability of one Markov
state over another.
There are lots of ways to calculate regime switching GARCH. None of the
ones I can think of assume covariance stationarity. These are different
regimes, so different parameters apply to the two (or more) regimes.
--
Brian G. Peterson
http://braverock.com/brian/
Ph: 773-459-4973
IM: bgpbraverock
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