Simulation Procedures

Instructions:

These procedures can be downloaded individually, or together as one zip file: sim.zip . Place all files (including declaration files ending in ".dec" into your "/gauss/src" directory.

Individual Programs:

estwhite.g & estwhite.dec Procedure with necessary declaration file to estimate an Arma(1,1)-Garch(1,1) model with possibly t-distributed errors and/or extract the whitened errors which can be used for bootstrapping functions of interest such as a terminal stock price distribution. (Note: requires whiten.g & whiten.dec procedure below to work)

whiten.g & whiten.dec Procedure with necessary declaration file used to whiten data which follows an ARMA(1,1)-GARCH(1,1) Often called within estwhite.g above.
boot.g &boot.dec Procedure with necessary declaration file, used to recolor draws of whitened error terms according to an ARMA(1,1)-GARCH(1,1) process. Useful for simulating terminal asset prices in conjunction with estwhite.g above.

simgarch.g & simgarch.dec Procedure with necessary declaration file used to simulate an Arma(1,1)-Garch(1,1) model with possibly t-distributed errors.

simjdiff.g Procedure used to simulate a jump diffusion process with stochastic volatility allowing for possible correlation between asset returns and the volatility process. Theoretical moments for the asset price at some date in the future (given the parameters of the process) are also give. Note: This is the process used in Bates (1996), "Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options." Review of Financial Studies, vol 9, no 1, 69-107.

Last modified: 1/1/2003