Volatility Models: From GARCH to Multi-Horizon Cascades

FINANCIAL MARKETS: RISK, VOLATILITY AND FUTURE, F. Columbus, ed., Nova Science Publishers, Forthcoming

49 Pages Posted: 16 Jun 2009

See all articles by Alexander Subbotin

Alexander Subbotin

Renaissance Finance

Thierry Chauveau

National Center for Scientific Research (CNRS)

Kateryna Shapovalova

Université Paris I Panthéon-Sorbonne; Paris School of Economics (PSE)

Date Written: June 15, 2009

Abstract

We overview different methods of modeling volatility of stock prices and exchange rates, focusing on their ability to reproduce the empirical properties in the corresponding time series. The properties of price fluctuations vary across the time scales of observation. The adequacy of different models for describing price dynamics at several time horizons simultaneously is the central topic of this study. We propose a detailed survey of recent volatility models, accounting for multiple horizons. These models are based on different and sometimes competing theoretical concepts. They belong either to GARCH or stochastic volatility model families and often borrow methodological tools from statistical physics. We compare their properties and comment on their practical usefulness and perspectives.

Keywords: Volatility modeling, GARCH, stochastic volatility, volatility cascade, multiple horizons in volatility

JEL Classification: G10, C13

Suggested Citation

Subbotin, Alexander and Chauveau, Thierry and Shapovalova, Kateryna, Volatility Models: From GARCH to Multi-Horizon Cascades (June 15, 2009). FINANCIAL MARKETS: RISK, VOLATILITY AND FUTURE, F. Columbus, ed., Nova Science Publishers, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1420244

Alexander Subbotin (Contact Author)

Renaissance Finance ( email )

9, chemin Pierre de Ronsard
Courbevoie, 92400
France

Thierry Chauveau

National Center for Scientific Research (CNRS) ( email )

3, rue Michel-Ange
Paris cedex 16, 75794
France
33 1 44 07 82 68 (Phone)
33 1 44 07 82 70 (Fax)

Kateryna Shapovalova

Université Paris I Panthéon-Sorbonne ( email )

17, rue de la Sorbonne
Paris, IL 75005
France

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

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