Anon

Autoregressive Heteroscedasticity Model and Its Variants 225

0 200 400 600 800 1,000

−3

−2.5

−2

−1.5

−1

−0.5

0

0.5

1

1.5

2

Time Steps

Returns

FIGure 11.7 Simulated Returns Obtained with a GARCH(1,1) Process Assuming
c = 0.1, a 1 = 0.4, and b 1 = 0.4

0 200 400 600 800 1,000

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Time Steps

Volatility

FIGure 11.8 Plot of Volatility Relative to Figure 11.7