Forecasting a bivariate BEKK GARCH

[Kimani]

Hi everyone,

Could someone please assist me on how to forecast a bivariate BEKK GARCH for an out of sample period. I have been able to come up with the individual variances of two series y1 and y2 and also their covariance over time. However I have had problems forecasting. I have tried using a code previously suggested a while ago in this forum by Trubador but I couldn't understand the particular line 'Name of your system equation
%eq = "syseq"

Below is the code I am referring to. Thank you for taking your time :)

'It is assumed that you have already saved conditional variances, conditional covariance and residuals
'and named them respectively as GARCH01, GARCH02, GARCH01_02, RESID01 and RESID02.

'Generate new series for forecasted variables
for %y GARCH01 GARCH02 GARCH01_02 RESID01 RESID02
series {%y}f= {%y}
next

'Organize the estimated coefficients into matrix form.
'First order model (BEKK-GARCH(1,1)) is assumed.
sym(2) M
vector(2) A1
vector(2) B1

'Name of your system equation
%eq = "syseq"

'Constant is assumed to be the only exogenous variable in each mean equation.
'Therefore coefficients of variance specification should start at c(3).
M(1,1)={%eq}.@coefs(3)
M(1,2)={%eq}.@coefs(4)
M(2,2)={%eq}.@coefs(5)
A1(1)={%eq}.@coefs(6)
A1(2)={%eq}.@coefs(7)
B1(1)={%eq}.@coefs(8)
B1(2)={%eq}.@coefs(9)

'Number of observations used in the estimation
!n=syseq.@regobs

'Define out of sample forecast horizon
!h = 20

'Perform dynamic forecasts via adjusting the sample
for !j=1 to !h
smpl @first+!n+!j-1 @first+!n+!j
GARCH01f = M(1,1) + A1(1)^2*RESID01f(-1)^2 + B1(1)^2*GARCH01f(-1)
GARCH02f = M(2,2) + A1(2)^2*RESID02f(-1)^2 + B1(2)^2*GARCH02f(-1)
GARCH01_02f= M(1,2) + A1(1)*A1(2)*RESID01f(-1)*RESID02f(-1) + B1(1)*B1(2)*GARCH01_02f(-1)
RESID01f = 0
RESID02f = 0
next

smpl @all[/color]

trubador
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Joined: Thu Nov 20, 2008 11:04 pm

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Re: multivariate GARCH forecast code! hel

[Kimani]

Anyone??