Simulation study

Abstract

The following chapter examines the theoretical properties of the FKS-GARCH model discussed in chapters 3 and 4 through simulated data. A key objective of the simulation study is, therefore, to establish the finite sample properties of the estimated GARCH parameters (${\widehat \alpha_1}$, ${\widehat \beta_1}$, ${\widehat \gamma_1}$), as well as the behavior of the VP in dependence of the number of knots, i.e., ${\widehat \eta_1}$ ($\widehat K$ ). Furthermore, this study investigates the accuracy of the estimated knot locations $\widehat t$ in dependence of different starting values and the ability to select the true number of knots K₀ with the presented model selection criteria.