I'm trying to estimate the parameters for GARCH(1,1) process.
Here's my code:
loglikelihood <-function(theta) {
h=((r[1]-theta[1])^2)
p=0
for (t in 2:length(r)) {
h=c(h,theta[2]+theta[3]*((r[t-1]-theta[1])^2)+theta[4]*h[t-1])
p=c(p,dnorm(r[t],theta[1],sqrt(h[t]),log=TRUE))
}
-sum(p)
}
Then I use nlminb to minimize the function loglikelihood:
nlminb( c(0.001,0.001,0.001,0.001), loglikelihood, lower=c(0.000001,0,0,0))
This does not produce a good result: the iteration limit is reached and
increasing it won't help. I have used "garchFit" from fGarch-package to
estimate the parameters. I set garchFit to use nlminb as well, and it produces
a result within just a few seconds.
However, for modification purposes, I need to get my own code working.
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