Asymmetry and Leverage in Conditional Volatility Models

Feb 3rd, 2012
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University of Kent, Canterbury and Medway
Course: finance
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This paper is concerned with the three most widely-used univariate conditional volatility models, namely the GARCH, GJR (or threshold GARCH) and EGARCH models. These models are important in estimating and forecasting volatility, as well as in capturing asymmetry, which is the different effects on conditional volatility of positive and negative effects of equal magnitude, and in capturing leverage, which is the negative correlation between returns shocks and subsequent shocks to volatility.

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