[R] Questions regarding R and fitting GARCH models

Dale Smith dsmith at viciscapital.com
Thu Jul 19 23:07:34 CEST 2007

As for (3) below, we are also interested in the xi parameter from the
gpdFit function from fExtremes. It seems the fit classes returned by the
associated functions don't have the full properties as finMetrics has
for its classes.

My solution was to modify the appropriate fMetrics code, build a new
package, and install it. I haven't completed that yet. Are there any
other things I can try?

Dale Smith
Vicis Capital, LLC

-----Original Message-----
From: r-help-bounces at stat.math.ethz.ch
[mailto:r-help-bounces at stat.math.ethz.ch] On Behalf Of Jeroen van der
Sent: Thursday, July 19, 2007 4:54 PM
To: r-help at stat.math.ethz.ch
Subject: [R] Questions regarding R and fitting GARCH models

Dear all,

I've recently switched from EViews to R with RMetrics/fSeries (newest
version of july 10) for my analysis because of the much bigger
flexibility it offers. So far my experiences had been great -prior I
had already worked extensively with S-Plus so was already kind of
familiar with the language- until I got to the fSeries package.

My problem with the documentation of fSeries is that it is pretty
sparse; therefore I don't whether I am doing something wrong or if my
problem is related to elementary statistics (though I hold an MSc in
Econometrics, it's been quite awhile :o). Next to that I have two
questions related to the syntaxis of the R language itself; I've been
searching for a good couple of hours but couldn't find the answers.
Hope you can help me out.

>From the descriptive statistics of my series, I had determined that my
GARCH error term should follow a student's t distribution, preferrably
skewed; the sstdFit function returns nu=2.002 and xi=1.012. I know
that for this distribution 2 degrees of freedom means the second,
third and fourth moment are not defined; however, the QQ plot looks
good -had to use the skwt package though, because rsstd didn't work-
so I decided to give it a try.

1) That didn't go all to well. garchFit returns alpha1 and beta1 of
0.1 and 0.8 respectively (and beta1 has a standard error of NaN) -
which are not consistent at all with what EViews reported. How is this
possible? Is it because GARCH estimation with a student's t
distribution with 2 degrees of freedom is impossible? What are my
options in this case? Or do I need to use garchSpec, of which I have
absolutely *no* idea what its use is (i.e. the entire idea is to
obtain estimates for a given order of AR-GARCH, right)?

2) R/RGui crashes frequently - also if I "just" want to estimate a
GARCH(1,1) with a student's t distributed error term and 4 or 5
degrees of freedom. I think it just gets into an endless calculation
loop; is there a way to abort this?

3) Is there a way to extract the data from the garchFit objects? So if
"fit" is my object, how can I extract specific data like the
fit$coef[1] I can use with other objects? Ultimately, fSeries comes
with a really nice plotting function (i.e., plot(fit, which=2)) but I
want to extract the series it actually plots from there - is that
possible like the hist function?

Thanks a lot for your time.

Best regards,

Jeroen van der Heide

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