Calibration and Parameter Estimation in Models › Key Parameters

The key parameters for the GARCH(1,1) model are:

• $\omega$: Constant baseline variance term.
• $\alpha$: ARCH parameter. Measures the reaction of volatility to recent return shocks (innovations).
• $\beta$: GARCH parameter. Measures the persistence of past variance.
• $\mu$: Mean return parameter.