Introduction

Volatility plays a central role in empirical finance and financial risk management and lies at the heart of any model for pricing derivative securities. Research on changing volatility (i.e., conditional variance) using time series models has been active since the creation of the original ARCH (AutoRegressive Conditional Heteroscedasticity) model in 1982. From there, ARCH models grew rapidly into a rich family of empirical models for volatility forecasting during the last twenty years. They are now widespread and essential tools in financial econometrics.