Hi Guys,
To all the quantitative traders out there (or, hell, anyone who knows about this stuff): do you guys actually use ARCH or GARCH models (and variations thereof, such as MGARCH, TARCH, etc) on the desk and to confirm or initiate investment ideas?
I'm studying them right now and wonder how practical they really are and how well they perform empirically. If not those, then what do you use to model/"predict" volatility and/or correlation?
Thanks for the help.
m0nk3y
do a search on nuclearphynance and you'll find several topics on this.
in summary, people build them, but the actual edge gained with these models is limited to non-existent.
is there a reason you are learning about ARCH models? I could suggest more worthwhile topics if I know what you are trying to do.
Well, not ARCH in particular, but any form of ARCH & GARCH. I'm studying them right now and was wondering how practical they really are. That's all.
Like aachimp said, ARCH/GARCH models are built into the trading algorithms that are usually put together by quants. Risk Management departments take advantage of them, too. We had a speaker from a HF come in recently and there was some talk about these types of models, so they are used to a certain extent...I, personally, just don't know how much exactly.
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