A range-based GARCH model for forecasting financial volatility

Dennis Mapa ()

Philippine Review of Economics, 2003, vol. 40, issue 2, 73-90

Abstract: A new variant of the ARCH class of models for forecasting the conditional variance, to be called the Generalized AutoRegressive Conditional Heteroskedasticity Parkinson Range (GARCH-PARK-R) model, is proposed. The GARCH-PARK-R model, utilizing the extreme values, is a good alternative to the “realized volatility” model which requires a large amount of intra-daily data that remain relatively costly and are not readily available. The estimates of the GARCH-PARK-R model are derived using the Quasi-Maximum Likelihood Estimation (QMLE). The results suggest that the GARCHPARK- R model is a good middle ground between intra-daily models, such as the realized volatility, and inter-daily models, such as the ARCH class. The forecasting performance of the models is evaluated using the daily Philippine Peso-U.S. Dollar exchange rate from January 1997 to December 2003.

Keywords: Volatility; GARCH-PARK-R; QMLE (search for similar items in EconPapers)
JEL-codes: C53 (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (2)

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