GARCH(1,1) Estimation

[ophadnavis]

Hi,

I am estimating Garch equation for CBOE VIX index values.

In this regard i have some questions?

1. Can i take the dependent variable as log returns of VIX?

2. Do i need to set the Restirction to VarianceTarget or None ?

3. Is it correct that by setting restriction to variance target it ensure that gamma = 1 - alpha - beta

4. what is the significane of setting restriction to none


Thanks

[JimForest]

If you are interested in the return of the VIX index, then it would make sense to have that as the dependent variable.

I have no idea as far as restrictions as I don't know what you are trying to accomplish.

However, modeling VIX as the dependent variable in a GARCH model would be a way of evaluating the volatility of volatility. This would be a relevant question wr option market behavior.

[ophadnavis]

Hi Jim,

Thanks for your help. In the eview software there is a parameter to be set for Restrictions (See the attachment). I am not able to understand if which of the options is to be selected "none" or "Igarch" or "variance target".

Please suggest

Thanks

Regards
Onkar