In this article you get familiar with basic concepts behind GARCH models family and practical use of it. General properties, terms and notation of conditional variance models Advantage of conditional variance models is that they better describe following time series properties: Returns of an asset have positive excess kurtosis[1] which means their PDF peak is sharper than the normal PDF …
Tag: model
Introduction to volatility models with Matlab (SMA, EWMA, C-C, Range estimators)
In this article I will introduce some of the tools used to model volatility with examples in Matlab. Let’s start with a definition of volatility – Volatility is the degree of variation of a price series over time as measured by the standard deviation of returns. Why is volatility of vast importance in financial world? One of the main reason …
Introduction to volatility models with Matlab (Implied volatility)
Implied volatility (IV) is the volatility of an asset derived from changes in value of corresponding option in such way that if we input IV into option pricing model, it will return theoretical value equal to the current option value. Contrary to historical volatility, IV is the volatility forecast for price of the underlying asset from current time to option …