ewmaVol: Exponentially weighted moving average (EWMA) volatility...

In MFTSR: Modelling Financial Time Series with R

Description

Compute RiskMetrics type EWMA volatility estimator for a vector of returns.

Usage

ewmaVol(r, lambda = NULL, half.life = NULL, overlap = 1,
  demean = c("none", "sample", "ewma"))

Arguments

r	any univariate data object that can be coerced to an xts object
lambda	Scalar exponential decay parameter. Must be between 0 and 1. If lambda is NULL then half.life must be specified and the value of lambda is computed from the value of half.life using lambda = exp(log(0.5)/half.life).
half.life	Scalar half-life defined as time lag at which the exponential weights decay by one half. If lambda is not NULL then half.life is ignored and is computed internally from the given value of lambda using log(0.5)/log(lambda).
overlap	Integer value giving the aggregation period for overlapping returns. For example, if r represents daily returns and overlap=5 then r is converted to a daily time series of 5-day overlapping returns. Default value is 1.
demean	Character string indicating the method used to de-mean the returns. Valid choices are "none" for no de-meaning; "sample" for the sample mean; and "ewma" for an EWMA estimate of the mean. For daily or weekly returns the mean is typically assumed to be zero. For longer horizon returns, the mean is typically not zero. Default value is "none". initiated with the sample variance for returns.

Details

The EWMA variance estimator satisfies the recursion s(t)^2 = lambda*r(t-1)^2 + (1-lambda)*s(t-1)^2 where r(t) is the (continuously compounded) return and lambda is the exponential decay parameter. The recursion is typically

Value

An object of class "ewmaVol" for which there are print, plot, and predict methods, and extractor functions fitted and residuals.

An object of class ewmaVol is a list with the following components:

• returns xts vector of returns

• sigma xts vector of EWMA volatility estimates

• overlap scalar overlap value

• call function call

• lambda scalar exponential decay value

• half.life scalar half-life value

Author(s)

Eric Zivot

Examples

## Not run: 
ewmavol(r)

## End(Not run)

MFTSR documentation built on May 2, 2019, 5:26 p.m.