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I have tried to write the log likelihood for a GARCH(1,1) model in a FRML, for use with the ML command, but Im not sure how to specify the lagged h(t) variable. How can I do this?

April 26, 2017Command garch log ML model write

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I have tried to write the log likelihood for a GARCH(1,1) model in a FRML, for use with the ML command, but Im not sure how to specify the lagged h(t) variable. How can I do this?

1 Answer

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GARCH(1,1) can’t be done with the regular ML in a FRML, due to the recursive nature of the h(t) equation. You’ll need to use the PROC interface to ML (see the ML PROC examples in the TSP examples library).