The Box-Jenkins time series analysis rests on important concept as stationary and residuals of ARMA models follows white noise. These concepts are insufficient for the analysis of financial time series. The paper proposes main characteristic of volatility in financial time series and general overview of most common models for time series modeling. This paper also outlines characteristics of DAX index’s volatility and shows how to specify a composite conditional mean and variance model using GARCH(1,1) model. We finally apply GARCH methodology to estimate VaR and compare with other approach.
