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Medium · statistical_analysis · Quant Researcher interview question · garch, log_likelihood, conditional_variance, volatility, statistical_analysis
The GARCH(1,1) model is a cornerstone of financial time series analysis, used to forecast the volatility of asset returns. Calculating its log-likelihood is the critical inner loop for parameter estimation, where models are calibrated to market data via maximum likelihood. This process is fundamental for risk management and derivatives pricing at quantitative trading firms. Task Implement the function garch_log_likelihood(returns, omega, alpha, beta) to compute the log-likelihood of a GARCH(1,1