The model that will take the shortest time to revert to its mean is the model with the lowest persistence defined by $\alpha + \beta$. So B is the right answer with $\alpha + \beta = 0.97$. | Financial Risk Manager Part 1 Quiz - LeetQuiz
Financial Risk Manager Part 1
Explanation:
The correct answer is B. In GARCH models, the persistence parameter (α + β) determines how quickly the model reverts to its long-term mean. A lower persistence value means faster mean reversion:
Option B has α + β = 0.97
Lower persistence = faster mean reversion
Higher persistence = slower mean reversion
Therefore, the model with α + β = 0.97 will revert to its mean the fastest.
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The model that will take the shortest time to revert to its mean is the model with the lowest persistence defined by α+β. So B is the right answer with α+β=0.97.
