Handbook of Volatility Models and Their Applications

A complete guide to the theory and practice of volatility models in financial engineering

Volatility has become a hot topic in this era of instant communications, spawning a great deal of research in empirical finance and time series econometrics. Providing an overview of the most recent advances, Handbook of Volatility Models and Their Applications explores key concepts and topics essential for modeling the volatility of financial time series, both univariate and multivariate, parametric and non-parametric, high-frequency and low-frequency.

Featuring contributions from international experts in the field, the book features numerous examples and applications from real-world projects and cutting-edge research, showing step by step how to use various methods accurately and efficiently when assessing volatility rates. Following a comprehensive introduction to the topic, readers are provided with three distinct sections that unify the statistical and practical aspects of volatility:

• Autoregressive Conditional Heteroskedasticity and Stochastic Volatility presents ARCH and stochastic volatility models, with a focus on recent research topics including mean, volatility, and skewness spillovers in equity markets

• Other Models and Methods presents alternative approaches, such as multiplicative error models, nonparametric and semi-parametric models, and copula-based models of (co)volatilities

• Realized Volatility explores issues of the measurement of volatility by realized variances and covariances, guiding readers on how to successfully model and forecast these measures

Handbook of Volatility Models and Their Applications is an essential reference for academics and practitioners in finance, business, and econometrics who work with volatility models in their everyday work. The book also serves as a supplement for courses on risk management and volatility at the upper-undergraduate and graduate levels.

Content:
Chapter One Volatility Models (pages 1–45): Luc Bauwens, Christian Hafner and Sebastien Laurent
Chapter Two Nonlinear Models for Autoregressive Conditional Heteroskedasticity (pages 47–69): Timo Terasvirta
Chapter Three Mixture and Regime?Switching GARCH Models (pages 71–102): Markus Haas and Marc S. Paolella
Chapter Four Forecasting High Dimensional Covariance Matrices (pages 103–125): Kevin Sheppard
Chapter Five Mean, Volatility, and Skewness Spillovers in Equity Markets (pages 127–145): Aamir R. Hashmi and Anthony S. Tay
Chapter Six Relating Stochastic Volatility Estimation Methods (pages 147–174): Charles S. Bos
Chapter Seven Multivariate Stochastic Volatility Models (pages 175–197): Yasuhiro Omori and Tsunehiro Ishihara
Chapter Eight Model Selection and Testing of Conditional and Stochastic Volatility Models (pages 199–222): Massimiliano Caporin and Michael McAleer
Chapter Nine Multiplicative Error Models (pages 223–247): Christian T. Brownlees, Fabrizio Cipollini and Giampiero M. Gallo
Chapter Ten Locally Stationary Volatility Modeling (pages 249–268): Sebastien Van Bellegem
Chapter Eleven Nonparametric and Semiparametric Volatility Models: Specification, Estimation, and Testing (pages 269–291): Liangjun Su, Aman Ullah, Santosh Mishra and Yun Wang
Chapter Twelve Copula?Based Volatility Models (pages 293–316): Andreas Heinen and Alfonso Valdesogo
Chapter Thirteen Realized Volatility: Theory and Applications (pages 317–345): Sujin Park and Oliver Linton
Chapter Fourteen Likelihood?Based Volatility Estimators in the Presence of Market Microstructure Noise (pages 347–361): Yacine Ait?Sahalia and Dacheng Xiu
Chapter Fifteen HAR Modeling for Realized Volatility Forecasting (pages 363–382): Fulvio Corsi, Francesco Audrino and Roberto Reno
Chapter Sixteen Forecasting Volatility with MIDAS (pages 383–401): Eric Ghysels and Rossen Valkanov
Chapter Seventeen Jumps (pages 403–445): Cecilia Mancini and Francesco Calvori
Chapter Eighteen Nonparametric Tests for Intraday Jumps: Impact of Periodicity and Microstructure Noise (pages 447–463): Kris Boudt, Jonathan Cornelissen, Christophe Croux and Sebastien Laurent
Chapter Nineteen Volatility Forecasts Evaluation and Comparison (pages 465–486): Francesco Violante and Sebastien Laurent