Stochastic Volatility in Financial Markets: Crossing the Bridge to Continuous Time / Edition 1

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Shastic Volatility in Financial Markets presents advanced topics in financial econometrics and theoretical finance, and is divided into three main parts. The first part aims at documenting an empirical regularity of financial price changes: the occurrence of sudden and persistent changes of financial markets volatility. This phenomenon, technically termed 'shastic volatility', or 'conditional heteroskedasticity', has been well known for at least 20 years; in this part, further, useful theoretical properties of conditionally heteroskedastic models are uncovered. The second part goes beyond the statistical aspects of shastic volatility models: it constructs and uses new fully articulated, theoretically-sounded financial asset pricing models that allow for the presence of conditional heteroskedasticity. The third part shows how the inclusion of the statistical aspects of shastic volatility in a rigorous economic scheme can be faced from an empirical standpoint.

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Editorial Reviews

Fornari (Bank of Italy) and Mele (U. du Littoral) first planned a collection of their published papers, then decided to link them into a coherent account, found themselves revising the original papers considerably, and finally ended up with a much more concise and theoretical account than they started with. They emphasize the use of the popular autoregressive conditionally heteroscedastic (ARCH) models in formulating, estimating, and testing the continuous-time stochastic volatility models favored in the theoretical models. Their readers should be advanced undergraduates, graduates, or researchers in finance, quantitative finance, or financial economics. Only names are indexed. Annotation c. Book News, Inc., Portland, OR (
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Product Details

Table of Contents

List of figures. List of tables. Preface. 1. Introduction. 2. Continuous time behavior of non linear ARCH models. 3. Continuous time shastic volatility option pricing: foundational issues. 4. Models of the term structure with shastic volatility. 5. Formulating, solving and estimating models of the term structure using ARCH models as diffusion approximations. References. Index.

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