Stochastic Volatility

<body stylesrc="../_private/template_title.htm" topmargin="10" leftmargin="10" bgcolor="#FFFFFF" link="#333366" vlink="#000000" alink="#000000"> <div align="left"> <table border="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" cellpadding="0" id="table2"> <tr> <td width="780" align="center"> <div align="center"> <table border="0" cellpadding="5" cellspacing="0" height="206" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table3"> <tr> <td align="right" height="198" width="1%"> <p align="left"> <img border="0" src="../images/book_shephard_n_(2005).gif" width="134" height="200"></td> <td valign="top" align="left" height="198"> <table border="0" cellspacing="1" style="border-collapse: collapse" bordercolor="#111111" cellpadding="0" id="table4"> <tr> <td colspan="3" width="0%"> <p class="book_title">Stochastic Volatility<br> <font size="3">Selected Readings</font></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> <img border="0" src="../images/blank_2x2.gif" width="2" height="2"><img border="0" src="../images/blank_2x2.gif" width="2" height="2"></td> <td width="52%" class="book_details_tags" valign="top" height="144" align="left" rowspan="9"> <map name="FPMap5"> <area href="../main/ratings.htm" shape="rect" coords="73, 0, 163, 33"> </map> <img border="0" src="../images_title/shepha7.gif" usemap="#FPMap5" width="180" height="158"></td> <td class="book_details" height="112" align="center" width="50%" rowspan="7"> <map name="FPMap4"> <area target="_top" href="../link_topic/best_of_2005.htm" shape="rect" coords="0, 0, 124, 108"> </map> <img border="0" src="../images/best_of_award_2005.gif" usemap="#FPMap4" width="125" height="109"></td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> <td class="book_details" height="32" align="center" width="50%" rowspan="2"> </td> </tr> <tr> <td width="1%" class="book_details_tags" valign="top" height="16" align="left"> </td> </tr> </table> </td> </tr> </table> </div> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="468" id="table5"> <tr> <td> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> <table border="0" cellpadding="5" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table6"> <tr> <td width="50%" valign="top"> <p align="left" class="body" style="margin-top: 0"><strong style="font-weight: 400">This edited collection of seminal research papers on stochastic volatility models is a cute idea. To place it in context, you need a little background. Back in 1995, ARCH/GARCH models were sweeping Wall Street. They were a hot topic in econometrics research, and their discoverer, Robert Engle, edited a <a href="../titles/engle_r_(1995).htm">collection</a> of seminal papers on the topic. Now, ten years later, ARCH/GARCH models are still widely used, but their limitations are motivating research in alternative models, including stochastic volatility models. Neil Shephard is also a recognized researcher in time series models. His edited collection on stochastic volatility models appears in the same series of Oxford University Press books as Engle's, and it sports a similar red cover. It comes across as a friendly answer to the earlier book. For researchers or anyone interested in heteroskedastic time series models, it will be a welcome complement.</strong></p> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="125" align="left" id="table7"> <tr> <td width="120"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td><td width="5"> </td> </tr> </table> <p align="left" class="body"><strong style="font-weight: 400">Shephard has done more than select important papers. He has written a wonderful introduction that places the papers in their historical context. Research in stochastic volatility is fragmented among several disciplines from ivory tower economics to Wall Street risk management. It is easy for someone to immerse himself in one area of the research with little awareness of what else is out there. I think this is where Shephard's contribution is most valuable. His introduction is a wonderful survey, highlighting not only papers included in the edited collection, but many others as well. </strong></p> <p align="left" class="body"><strong style="font-weight: 400">Unlike the papers in Engle's book, these emphasize financial applications. They will appeal to financial researchers, practicing financial engineers and technically sophisticated risk managers. If you have some familiarity with time series modeling and want to delve deeply into stochastic volatility models, this edited collection is your starting point.</strong></p> </td> <td width="50%" valign="top" class="body" rowspan="2"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table8"> <tr> <td width="100%" bgcolor="#333366"> <p class="header_yellow" align="center">Contents</td> </tr> <tr> <td width="100%" class="explanatory_text"> <table border="1" cellpadding="0" cellspacing="5" style="border-collapse: collapse" bordercolor="#CCCCFF" bgcolor="#CCCCFF" width="100%" id="table9"> <tr> <td class="contents_expanded"> <p class="contents">General Introduction </p> <p class="contents" style="margin-top: 12"><strong>Part I: Model Building</strong> </p> <p class="contents">1. P. K. Clark: A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices </p> <p class="contents">2. S. J. Taylor: Financial Returns Modelled by the Product of Two Stochastic Processes: A Study of Daily Sugar Prices, 1961-79 </p> <p class="contents">3. B. Rosenberg: The Behavior of Random Variables with Nonstationary Variance and the Distribution of Security Prices </p> <p class="contents">4. J. Hull and A. White: The Pricing of Options on Assets with Stochastic Volatilities </p> <p class="contents">5. F. X. Diebold and M. Nerlove: The Dynamics of Exchange Rate Volatility: A Multivariate Latent Factor ARCH Model </p> <p class="contents">6. A. C. Harvey, E. Ruiz, and N. Shephard: Multivariate Stochastic Variance Models </p> <p class="contents">7. T. G. Andersen: Stochastic Autoregressive Volatility: A Framework for Volatility Modelling </p> <p class="contents">8. F. Comte and E. Renault: Long Memory in Continuous-time Stochastic Volatility Models </p> <p class="contents" style="margin-top: 12"><strong>Part II: Inference</strong> </p> <p class="contents">9. E. Jacquier, N. G. Polson, and P. E. Rossi: Bayesian Analysis of Stochastic Volatility Models </p> <p class="contents">10. S. Kim, N. Shephard, and S. Chib: Stochastic Volatility: Likelihood Inference and Comparison with ARCH Models </p> <p class="contents">11. A. R. Gallant, D. Hsieh, and G. Tauchen: Estimation of Stochastic Volatility Models with Diagnostics </p> <p class="contents" style="margin-top: 12"><strong>Part III: Option Pricing</strong> </p> <p class="contents">12. A. Melino and S. M. Turnbull: Pricing Foreign Currency Options with Stochastic Volatility </p> <p class="contents">13. S. L. Heston: A Closed-Form Solution for Options with Stochastic Volatility, with Applications to Bond and Currency Options </p> <p class="contents">14. M. Chernov and E. Ghysels: A Study Towards a Unified Approach to the Joint Estimation of Objective and Risk Neutral Measures for the Purpose of Options Valuation </p> <p class="contents" style="margin-top: 12"><strong>Part IV: Realized Variation</strong> </p> <p class="contents">15. T. G. Andersen, T. Bollerslev, F. X. Diebold, and P. Labys: The Distribution of Exchange Rate Volatility </p> <p class="contents">16. O. E. Barndorff-Nielsen and N. Shephard: Econometric Analysis of Realized Volatility and its use in Estimating Stochastic Volatility Models </td> </tr> </table> <p align="center" class="body"> <noscript></noscript> </p> <p> </td> </tr> </table> </td> </tr> <tr> <td width="50%" valign="bottom" align="left"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table10"> <tr> <td width="100%"> <script type="text/javascript"></script> <script type="text/javascript" src="http://pagead2.googlesyndication.com/pagead/show_ads.js"> </script> </td></tr> </table> </td> </tr> </table> <div align="left"> <table border="0" cellpadding="10" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" width="100%" id="table11"> <tr> <td width="50%" bgcolor="#FFFFCC" align="center"> <table border="0" cellpadding="0" cellspacing="0" style="border-collapse: collapse" bordercolor="#111111" bgcolor="#FFFFCC" id="table12"> <tr> <td> <p class="body" style="margin-bottom: 6; margin-left:10"><b><font color="#333366" size="3">For related books, see sections:</font></b></p> <p class="bullet" style="margin-left: 10; margin-top:5; margin-bottom:5"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/math_time_series.htm">Math - Time Series Analysis</a></p> <p class="bullet" style="margin-left: 10; margin-top:5; margin-bottom:5"> <img border="0" src="../images/bullet.gif" width="20" height="10"><a target="_top" href="../link_topic/finance_financial_econometrics.htm">Finance - Financial Econometrics</a></td> </tr> </table> </td> </tr> </table> </div> </td> <td>  </td> </tr> </table> </div>  <table border="0" style="border-collapse: collapse" width="100%" cellpadding="0" id="table1" bgcolor="#FFFFFF"> <tr> <td colspan="2" height="12"> <p style="margin-top: 0"> </td> </tr> <tr> <td align="right"> <p align="left" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Ads by Contingency Analysis.</font></a></td> <td align="left"> <p align="right" style="margin-bottom: 2px"> <a target="_top" href="http://www.riskexpertise.com/link/advertising.htm"> <font size="1" color="#000000" face="Arial">Advertise on this site.</font></a></td> </tr> <tr> <td align="center" colspan="2">  <iframe src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=iframe" allowtransparency="true" background-color="transparent" style="margin: 0px; padding: 0px; border-width: 0px" width="300" height="250" frameborder="0" marginwidth="0" marginheight="0" scrolling="no"> <![if lt IE 4]> <script src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=js" type="text/javascript"> </script> <noscript> <a href="http://servedbyadbutler.com/go2/;ID=147917;size=300x250;setID=93136"> <img src="http://servedbyadbutler.com/adserve/;ID=147917;size=300x250;setID=93136;type=img" border="0" height="250" width="300" alt=""></a> </noscript><![endif]> </iframe>   </td> </tr> </table> <p align="center" style="margin-top: 20"> <map name="FPMap0_I1"> <area href="http://www.riskbook.com" shape="rect" coords="0, 0, 184, 29" target="_top"></map> <img border="0" src="../images/open_book_riskbook.gif" usemap="#FPMap0_I1" width="185" height="30"></p> <p class="a" align="center"><font face="Arial" size="2"><a href="../main/disclaimer.htm">disclaimer</a></font></p> <p class="a" align="center"><span class="verdana10">website:</span> <a target="_top" href="http://www.contingencyanalysis.com"> <font size="2" face="Arial">http://www.contingencyanalysis.com</font></a><br> <span class="verdana10">books direct link:</span> <a target="_top" href="http://www.riskbook.com"><font size="2" face="Arial">http://www.riskbook.com</font></a><br> copyright <font face="Times New Roman">©</font> Contingency Analysis, 1996 - current</p> <p class="a" align="center"><map name="FPMap1_I1"> <area target="_top" href="http://www.contingencyanalysis.com" shape="rect" coords="0, 0, 240, 88"> </map><img border="0" src="../images/logo_book_white.gif" usemap="#FPMap1_I1" width="241" height="89"></p>  </body>