Volatility plays an important role in financial decision making which has motivated extensive research into the modelling of volatility processes. Thus far most empirical studies on stock market volatility have focused on the Generalised Autoregressive Conditional Heteroskedasticity (GARCH) model and its extensions which have proved to be very successful. In this book we have investigated and analysed the variability of stock index returns in the context of Stochastic Volatility (SV) models which have their origin in theoretical finance and represent an appealing alternative to the deterministic GARCH models.
KeywordsStochastic Volatility Forecast Performance Implied Volatility Stock Index GARCH Model
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