Comparing the accuracy of the volatility forecasting models, GARCH, SV and EWMA under different scenarios The WritePass Journal

Comparing the accuracy of the volatility forecasting models, GARCH, SV and EWMA under different scenarios Comparing the accuracy of the volatility forecasting models, GARCH, SV and EWMA under different scenarios Introduction Because of the rapid development of new and complex financial instruments in financial markets, the forecasting volatility of assets is playing a central role on risk management tasks and evaluating asset in finance. However, interestingly, the ability of forecasting accuracy of stochastic volatility always catches people’s eyes, because nobody wants loss his/her profits by inaccurate predictions. Opportunities might be lost due to overestimating of volatility; investors bear risk due to underestimating of volatility. In addition, risk control strategies and profitable portfolio are deeply influenced by accuracy of volatility forecasting models. After the financial crisis happened in 2008, generally, investors concentrate on risk-free investment rather than a risk one. Therefore, my paper is going to examine three different models, GARCH (see, for example, Bollerslev (1986)), SV (Taylor, 1986) and EWMA (see McAleer (2005)), under diverse volatility scenarios. By using those vo latility models, a simulation experiment will take a wide series of volatility scenarios representatives, which are typical in financial market or real assets market, to test their rates of return separately. My dissertation is consisted of 5 chapters including the introduction, literature review, methodology and empirical research, as well as the conclusion. Different chapters focus on different key points, but there are tight relationships within each other and they are constructed as follows. The introduction presents my personal ideas and understanding of fundamental concepts about negative relation between investment return and volatility, as well as three volatility forecasting models mentioned above. Generally, Generalised Autoregressive Conditional Heteroscedasticity (GARCH) and Stochastic Volatility (SV) are main two forecasting volatility methodology, nonetheless, considering the diversification of data source would have different effects on different models, it would be better to employ other forecasting volatility model, like EWMA model, to perform the simulation experiment which makes my results more convincing. Employing other people’s ideas of forecasting volatility from journals and papers, literature review will provide the historical developments of volatility forecasting models in asset markets. Simultaneously, several sparking ideas will be explained with the frame work of previous approaches of volatility forecasting models. Moreover, the problems founded in previous researches can also be avoided. For example, the inherent problem of the conditional variance indirect observed in using models measuring volatility, GARCH family models, SV models or EWMA have been advocated widely in literatures related (Michael, M. (2010)). Fundamentally, the journal of Autoregressive Conditional Heteroscedasticity with Estimated of the Variance of United Kingdom Inflation illustrated the frame work of ARCH model (Engle (1982)) that helps us deepen understanding of negative correlation between stock return and volatility, as well as the basic frame of forecasting volatility model. Other academi c journals, like Answering the sceptics:Yes, standard volatility models do provide accurate forecasts (Andersen, T. Bollerslev, T. (1988)), ARCH modelling in finance: a review of the theory and empirical evidence (Bollerslev, T. Chou, R. Kroner, K (1992)), Return to RiskMetrics: The Evolution of a Standard (RiskMetrics Group, Inc. (2001)), Forecasting accuracy of stochastic volatility, GARCH and EWMA models under different volatility scenarios (Nigel, M D. Jie (2010)), which provides strong fundamental theoretical evidences, will be referred to my dissertation and support my original hypothesis accuracy comparison of three different volatility forecasting models in the dissertation. From those academic journals or papers with different approaches with volatility forecasting models, some drawbacks of models can be modified. For instance, as observed by Bollerslev, T. (1987), several stylized facts cannot be predicted precisely by a majority of the latent volatility models. Nonethe less, those factors can be caught effortlessly on financial time series. The methodology discusses briefly empirical demonstration of GARCH, SV and EMWA models separately, including notations and data sources, the results of simulation experiment will also be shown in this section. As mentioned by Nigel(2010), â€Å" for the simulated data, we contrast the accuracy of volatility estimated in-sample and out-of sample using a range of error measures.† Besides, another critical point is to make suitable definition of the volatility space according to three different volatility forecasting models with a triplet of coefficients, for instance, CV2garch is determined by coefficients (). Afterwards, applying the process of realized variance, 100 examples of length=500, 1000, 3000 will be generated corresponding to each parameters. Utilizing 100 examples with T=1100 realization, an SV model, a GARCH model and an EWMA model are used to assess volatility with the decay factor suggested (RiskMetrics, 2001). The front 1000 data points are used for in-sample for ecasting, while the remainder is served as out-of-sample estimation. In order to achieve effectively comparison within three models with observed and estimated volatilities (Brailsford and Faff, 1996), three measures of forecasting accuracy are used (RMSE, MME(U),MME(0)). Empirical research section illustrates the findings employing real data source, which is consisted of 16 financial data sets. The data source is comprised of four equities, four commodities, four FX series and four equity indexes. All data are collected between 1 January 2000 and 31 December 2010 from data-stream. With difference logarithms of consecutive closing prices, the rates of return of different assets are figured out. In consideration of covering sufficient volatility scenario as much as possible, therefore, in diversified main financial markets, especially, small number of samples with frequent floating price in asset markets would be included. In addition, cross-section data with capturing examples would be chosen and then examined in the simulation experiment. In a word, the empirical research will present strong evidence, with real-financial data source, to prove the original ideas about accuracy comparison of three volatility forecasting models. Meanwhile, due to the im perfection of data source and the volatility forecasting models, which would affect the results of simulation, some acceptable biased results of the simulation experiments will be explained exhaustively. The final section (conclusion) will give a succinct summary of the simulation experiments under a series of volatility scenarios defined with persistence and volatility of volatility. Furthermore, unavoidable drawbacks of the simulation experiments will be explained, and feasible improvements will be promoted in this part, as well as bringing up further research about this topic and its trend of development. For example, analysing typical high frequency data with the seasonal changes, the results of accuracy of these three forecasting volatility models would show any empirical change or not. Reference Anderson, T.G. and T. Bollerslev (1998) Answering the skeptics: yes, standard volatility models do provide accurate forecasts, International Economic Review, 39, 885-905. Bollerslev, T. (1986) Generalized autoregressive conditional heteroscedasticity, Journal of Econometrics, 31,307-27 Bollerslev, T. (1987) A conditionally heteroscedasticity time series model for speculative prices and rates of return,   Review of Economics and Statistics, 69, 542 – 547. Bollerslec, T., R. Chou and K. Kroner (1992) ARCH modeling in finance: a view of the theory and empirical evidence, Journal of Econometrics, 52, 2-59 Brailsford, T. and R. Faff (1996) An evaluation of volatility forecasting techniques, Journal of Banking and Finance, 20, 419-38 Ding J. and N. Meade (2010), Forecasting accuracy of stochastic volatility, GARCH and EWMA models under different volatility scenarios, Applied Financial Economics, 20, 771-783 Engle, R. (1982) Autoregressive conditional heteroscedasticity with estimates of the variance of United Kingdom inflation, Econometrica, 50, 987-1008 McAleer, M. (2005) Automated inference and learning in modeling financial volatility, Econometric Theory, 21, 232 – 261. McAleer, M. (2010) Modelling and Forecasting Noisy Realized Volatility, Department of Economics and Finance, College of Business and Economics, University of Canterbury RiskMetrics Group, Inc. (2001) Return to Risk Metrics: The Evolution of a Standard, New York Taylor, S.J. (1986) Modelling Financial Time Series, Wiley, Chichester.

Cursive Writing for Learning Disabled

Cursive Writing for Learning Disabled Its not uncommon for special education students to struggle with writing. Dyslexia, dysgraphia, and various kinds of language-based disorders make themselves very pronounced when children are learning to write. But its less common for teachers to make this counter-intuitive move: Try cursive.   Generally considered to be more difficult for children than writing in manuscript (block letters) and losing ground in the battle for productive class time, script is finding a late-career resurgence with the special-ed crowd. Not only are there benefits to cursive writing that bleed into other skills (for example, the fine-motor workout of cursive writing has salutary effects on similar fingerwork), some scientists believe that children who can write neatly in script are better at math and other analysis. Why You Should Consider Cursive If handwriting is a struggle, give cursive writing a shot. Dont worry that handwriting (and reading handwriting) is becoming something of a lost art- all students, especially special ed kids, benefit from successes. Here are some reasons you may want to flip the script in your classroom: The letters flow much more easily, and usually only one movement is necessary. Children often struggle with the many fine movements required to print. For children with motor-planning issues, remembering where to put the circles and sticks, crossing ts and dotting is, and remembering the orientation of each letter is no easy task. How often have you seen these children confuse bs and ds and put the circles on ps on the wrong side?Spaces separate words in cursive, while the letters are joined. Therefore, phonetics are joined together. Many students find that script writing is conceptually easier to grasp in this regard.  Rarely will you see reversals in cursive writing, unlike printing. Children respond well to the left-to-right flow of writing.Teaching cursive saves time. Why spend time to learn printing first, when children will learn it through reading? Its simply not essential to have students print and learn cursive at the same time.  Most teachers report that children who le arn handwriting exclusively show no difficulties reading print. Thats not always the case when children learn printing first. In fact, many teachers moving to cursive writing instead of print report that it was the best move for their students. Some Advice for Teaching Cursive Stick with it.Begin with the letters without loops (t, i, d, p, m, n, r).Show the child how to slant the paper to make writing more natural.Begin with lowercase letters.Remember that motor skills of children with learning disabilities are often weak, provide dotted cursive writing paper for ease and guide the childs hand. Direct teaching is recommended. Remember to be patient, in the long run youre saving teaching time!

The Transforming Power of Suffering Essay Example | Topics and Well Written Essays - 1250 words

The Transforming Power of Suffering - Essay Example   At the time that this poem is written, Milton is one of the greatest writers of England, and this horrible condition called blindness is about to end his career, thus rendering him useless, much like the talent in the Bible which the third man buries and eventually becomes the reason for God to punish him (Matt. 25:26-30, The New International Version). For the poet, it seems that being blind is being useless, and being useless is tantamount to preparing oneself to get punished. This is the true cause of Milton’s suffering as he is writing this poem. ... H. Lawrence’s â€Å"The Blind Man.† In the story, Maurice secretly struggles with his blindness by keeping himself busy with daily chores on the farm: â€Å"He milked the cows, carried in the pails [and] attended to the pigs and horses† (Lawrence). These are actually a few things that a normal blind man can never get himself to do. Nevertheless, Maurice seems to be pushing himself to do these tasks. Why? The reason is one that he reveals to Bertie toward the end of the story: â€Å"What I am afraid of†¦is that [my wife Isabel will] find me a dead weight [and that] I feel it isn’t fair she’s saddled with me† (Lawrence). Maurice, therefore, just like the poet Milton, feels the same kind of suffering particularly because of their fear of being useless. Nevertheless, what Jernigan states – that â€Å"the blind tend to see [themselves] as others see [them]† (4) – is somehow true as most blind people tend to suffer only un til they realize that suffering brings them the gifts of humility, compassion, and hope. The virtue of humility is evident in the following lines of Milton’s â€Å"On His Blindness†: â€Å"†¦though my soul more bent/ To serve therewith my Maker, and present My true account, lest He returning chide† (Milton 4-6). In these lines of the poem, the poet himself admits that although he is ready to serve God, he has no choice but to humbly admit his â€Å"true account† – his actual circumstances or the fact that he is blind and that he cannot do anything about it. Indeed, humility is all about mustering enough courage to admit the true state of things and at the same time admitting one’s helplessness in the face of it.  

Willow Garage Essay Example | Topics and Well Written Essays - 1000 words

Willow Garage - Essay Example Among the positive values that other companies should emulate is sharing information as well as not concentrating on monetary gains. This way such companies remain productive and relevant, which in turn increases their consumer base relating to more profits. There is a common clichà © that knowledge is power, and information not shared is useless. This, in my opinion, is the light that guided the Willow Garage in its endeavors. The company availed ROS, which was associated with a library of information and tools that equip other researchers with the necessary software needed to develop robot applications. In addition, ROS also provided visualizers, device drivers, package management and message-passing that facilitated engineers’ understanding of video, 3D data and camera (Tobe, 2011). By availing this information, other robotics researchers are able to build off from the company’s foundation, as opposed to starting their research work afresh (Ashlee, 2014). In so doing, Willow garage emerges as the greater party compared to other companies. This is because it shares its findings with the world. In other words, it is more concerned with the advancement of robotics for the benefit of the world than building its own name. F urthermore, the work of the company is not lost as other researchers carry on with it. Similarly, companies should share their work and findings with others so that in the occurrence of any event leading to shutting down of the company, others can continue their legacy. Most businesses are profit-oriented. Because of this, most of their dealings are quantitative as opposed to qualitative. Such businesses do not care much about quality of their products and services. Moreover, their dealings are often confidential so that their competitors do not get wind of their work. In cases where they avail some of their information, there is always a cost involved. This is contrary to Willow Garage’s

Energy output of Bioethanol and Industrial Ethanol Essay Example for Free

Energy output of Bioethanol and Industrial Ethanol Essay Aim The aim of this investigation is to determine which of the two derivatives of ethanol releases more energy, Bioethanol or Industrial Ethanol. Hypothesis The main compound in both alcohols has the same chemical formulae C2H5OH, and the other compounds are unknown therefore the Energy output cannot be calculated exactly by using standard bond enthalpies. However, as the main compound is known and the same for both ethanols the energy output should be very similar. Therefore the difference in energy output only depends on the compounds which are blended to the alcohols. Apparatus Thermometer Metal can x2 Draught shield x4 Gloves Safety spectacles Heat-resistant mat Insulation card 100cm3 measuring cylinder x2 Spirit burner Clamp stand Balance Matches Substances E100 Bioethanol Industrial Ethanol Water Method The idea to do the experiment the way described is due to knowledge from past experiments and the IB textbook. Follow these steps 10 times, five times for each alcohol. Step 1: Measure 50cm3 of alcohol in a measuring cylinder Step 2: Weigh and record the empty spirit burner Step 3: Fill the 50cm3 of alcohol in the spirit burner Step 4: Weigh and record the filled spirit burner Step 5: Measure 100cm3 of Water in a measuring cylinder Step 6: Fill the water into the metal can Step 7: Set up the Apparatus as displayed (1 draught shield in each direction, south, north, west and east, forming a box around the apparatus; assure there are 2cm of space between the bottom of the metal can and the cotton wick) Step 7: Record the initial temperature of water Step 8: Light the cotton wick of the spirit burner Step 9: Record the temperature every 15 seconds until the cotton wick loses its flame Step 10: Weigh the spirit burner with the remaining alcohol to calculate how many grams of alcohol have been used Varables Temperature: Temperature of Water will be measured before every experiment. The whole experiment takes place at room temperature. Volume of Water: 100cm3 Mass of alcohol: 50cm3 filled in spirit burner. The mass will be measured before and after the experiment to figure how much has been used. Time: record every 15 seconds Concentration of alcohol: 1M Surface area of metal can which flame is heating up: same cans will be used and positioned at same place above the cotton wick to keep this constant. Length of cotton wick: 0.5cm Distance from cotton wick to bottom of metal can: 2cm Hazard Warnings Industrial Ethanol: Highly flammable. Therefore wear gloves and safety spectacles Bioethanol: Highly flammable. Therefore wear gloves and safety spectacles Chemistry HL Plan of Investigation

A Pentadic Analysis of Two Pleas for Christian Unity :: Religion Christians Christianity Burke Papers

A Pentadic Analysis of Two Pleas for Christian Unity Introduction The prayer for Christian unity began with Christ, himself (John 1:21), and continues today. This essay proposes to examine two pleas for Christian unity using the rhetorical theory of Kenneth Burke. According to Em Griffin, "Kenneth Burke was the foremost rhetorician of the twentieth century. Burke wrote about rhetoric; other rhetoricians write about Burke" (319). Burke's theory seems especially relevant to the study of pleas for unity because of his focus on identification. For Burke, rhetoric is identification. "You persuade a man only insofar as you can talk his language by speech, gesture, tonality, order, image, attitude, idea, identifying your ways with his" (Rhetoric 55). Additionally, Burke equates identification with consubstantiality. "To identify A with B is to make A 'consubstantial' with B" (Rhetoric 21). The two calls for Christian unity to be analyzed are Thomas Campbell's "Declaration and Address" and E. Glenn Wagner's The Awesome Power of Shared Beliefs. Campbell's address is important because of its historical significance. "This document, which calls for Christian unity through a return to the clear and unambiguous teachings of the New Testament, in many ways chartered the course for the movement the Campbells led" (Hughes 11). Wagner's book is chosen because of the contemporary prominence of the Promise Keepers movement. This essay will proceed by explaining relevant aspects of Kenneth Burke's works, including the methodology to be used, applying the methodology to the two pleas, and discussing the results. Dramatism and the Pentad Burke saw life as a drama played out in our language. By examining the words of a person, you can determine his or her motives. Motives are grammatical creations which explain "what people are doing and why they are doing it" (Grammar x). Foss provides the following explanation: We use rhetoric to constitute and present a particular view of our situation, just as the presentation of a play creates a certain world or situation inhabited by characters who engage in actions in a setting. Through rhetoric, we size up situations and name their structures and outstanding ingredients. How we describe a situation indicates how we are perceiving it, the choices we see available to us, and the action we are likely to take in our situation. (456) The pentad is a the tool used to investigate motives. Burke writes, ". . . any complete statement about motives will offer some kind of answer to these five questions: what was done (act), when or where it was done (scene), who did it (agent), how he did it (agency), and why (purpose)" (Grammar x).

‘God’ is nothing but the Supreme Truth Essay

Differing from world’s other great religions Buddhism, is not based on any conception of a Supreme Being or Godhead (Myss, 2006). Buddhism relies on human effort to relieve suffering, â€Å"These wise ones, meditative, persevering, always using strong effort attain Nirvana – the supreme peace and happiness† (Buddha, 5th Century B. C). The Buddha, the founder of Buddhism, is a human being who achieved great enlightenment or ‘Nirvana’; but, even the Buddha is not ‘God’. The acceptance of a Supreme Truth is the closest to the concept of ‘God’ in Buddhism. This Truth is to be realized by every individual, by following â€Å"Dharma†; one â€Å"who with clear understanding perceives the four noble truths: namely suffering, the origin of suffering, the cessation of suffering, and the eightfold holy way that leads to the cessation of suffering†¦Ã¢â‚¬  (Buddha, 5th Century B. C). By being righteous and practicing ‘ahimsa’ or non-violence, the misery-filled human life can be transcended to a state of Nirvana or ‘Self-Realization’. In this enlightened state, there is neither happiness nor misery; when questioned by a disciple about the state of ‘Nirvana’, Buddha is said to have answered â€Å"I am the State of Pure Consciousness, that is reflected in all beings† (as cited by Swami Sukhabhodanda, 1997). Buddhism initially evolved as a repudiation of Hindu God and God-heads. Hence, even the so-called god-heads have to attain perfection. Supreme State of Enlightenment is achieved only by the individual’s efforts and thus the soul undergoes the cycle birth-death-and re-birth according to its â€Å"Karma†- or its doings in adherence to the path of Dharma, until it reaches ‘Nirvana’. While accepting the Karmic cycle of Hinduism, the eight-fold path of Buddhism are very similar to the Biblical sayings; for example Buddha’s Dharma of Right Action is very similar to â€Å"Faith by itself, if it is not accompanied by action, is dead† (James 2:17). But differs from Christianity in that, 1) there is no ‘God’, 2) there is no Judgment Day, and 3) the acceptance of the concept of re-birth. ‘That Thou Art’ The Vedas or the Holy Scriptures are the basic foundation on which Hinduism stands. And in the Upanishads, which are a part of the Vedas, one finds a numbers of instances in which the concept of the Supreme Being or ‘God’ is analyzed. The Atharva Veda says â€Å"Verily He is One/ Single, Indivisible, Supreme Reality† (Atharva Veda 13/4/20). In fact, the Rg Veda, the oldest of the existing Vedas, elaborates the concept of ‘God’ thus: â€Å"He is One Brahma/ The Creator of the cosmos/ Who pervades and protects/ And enlightens aft beings/ He is One Supreme Entity/ Whom sages call by various names/ Such as Indra, the glorious/ Mitra, the benign friend/ Varuna, the greatest, the noblest/ Agni, the resplendent, the bright/ Yama, the dispenser of justice/ Matarishwa, the almighty† (Rig Veda 1/164/46). ‘God’ is neither male, nor female, the Supreme Sovereign of all creation, animate and inanimate, Mother and Father. It is important to note, that ‘God’is all this but not limited to this. Therefore, it is not possible to merely say ‘God’ is ‘He’ or ‘She’, or ‘It’. Nameless and formless, infinite and incomprehensible, pervading all things yet not confined to anything. The various names by which ‘It’ is addressed denote the names by which human beings identify ‘It’, the name â€Å"Brhaman† including. The Kenopanishad (2/1/3), puts the concept as difficult to comprehend for the limited human mind, â€Å"He who thinks that he knows (Him) really, does not understand anything and proves himself ignorant. He who realizes that he cannot know (Him) has best understood†. The same concept is further explained in the Bhagavad Gita (2/25) too, â€Å"This Atman (the ParaBrhman) is beyond the comprehension of the five senses; Unconceivable by the mind; Unchanging. Hence, O Arjuna, perceive the Atman truly as such, since it does not become you to grieve†.