Empirical Study On Volatility Forecast By GARCH Model

Sugar is one of indispensable materials in daily life,and with the development of new energy,it also plays a vital part as raw material of fuel ethanol.Compared with sugar futures and floor options,over-the-counter options are flexible,which ensures them as an important instrument to avoid sugar price fluctuations used by sugar related companies.The accuracy of volatility model is associated with the competitiveness of over-the-counter options as designer is concerned.As for volatility forecast,there are almost no articles from aspect of designers.Hence,in this article,sugar futures were taken as examples from an angle of over-the-counter option designer to conduct research.It was found that it is suitable to apply GARCH model to conduct prediction about volatility of sugar futures in China.Besides,it is an ideal choice for over-the-counter option designers to utilize700-day history data based on monthly volatility measured by GJR-GARCH model to predict,in order to guide over-the-counter futures prices and prepare hedging better.