Andersen, Torben G.; Benzoni, Luca - School of Economics and Management, University of Aarhus - 2010
We give an overview of a broad class of models designed to capture stochastic volatility in financial markets, with … GARCH, but we focus on a narrower set of specifications in which volatility follows its own random process and is therefore … a latent factor. These stochastic volatility specifications fit naturally in the continuous-time finance paradigm, and …