Varying Coefficient GARCH Models

  • Pavel ČížekEmail author
  • Vladimir Spokoiny


This paper offers a new method for estimation and forecasting of the volatility of financial time series when the stationarity assumption is violated. We consider varying–coefficient parametric models, such as ARCH and GARCH, whose coefficients may arbitrarily vary with time. This includes global parametric, smooth transition, and change–point models as special cases. The method is based on an adaptive pointwise selection of the largest interval of homogeneity with a given right–end point, which is obtained by a local change–point analysis.We construct locally adaptive volatility estimates that can perform this task and investigate them both from the theoretical point of view and by Monte Carlo simulations. Additionally, the proposed method is applied to stock–index series and shown to outperform the standard parametric GARCH model.


Change Point Adaptive Method Stock Index GARCH Model Stochastic Volatility Model 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  1. 1.Department of Econometrics & ORTilburg UniversityTilburgThe Netherlands
  2. 2.Weierstrass–InstituteMohrenstrasseGermany

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