The Parameters in a GARCH (1,1)model Are: Omega =0

question 5

Multiple Choice

The parameters in a GARCH (1,1) model are: omega =0.000002,alpha = 0.04,and beta = 0.95.Which of the following is the closest to the long run average volatility?

• A) 1.1%
• B) 1.2%
• C) 1.3%
• D) 1.4%

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Definitions:

Opportunity Costs

The cost of an alternative that must be forgone in order to pursue a certain action or the benefits you miss out on when choosing one alternative over another.

Economic Welfare

The overall health and well-being of an economy, often measured by standards of living, availability of goods and services, and income distribution.

Economic Efficiency

A state in which resources are ideally distributed to best meet the needs of every person or entity, reducing waste and inefficiency to a minimum.

Gains From Trade

The benefits that parties obtain from engaging in voluntary exchange of goods or services.