ANALYSIS OF STOCHASTIC AND NON-STOCHASTIC VOLATILITY MODELS.

Download or read book ANALYSIS OF STOCHASTIC AND NON-STOCHASTIC VOLATILITY MODELS. written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Changing in variance or volatility with time can be modeled as deterministic by using autoregressive conditional heteroscedastic (ARCH) type models, or as stochastic by using stochastic volatility (SV) models. This study compares these two kinds of models which are estimated on Turkish / USA exchange rate data. First, a GARCH(1,1) model is fitted to the data by using the package E-views and then a Bayesian estimation procedure is used for estimating an appropriate SV model with the help of Ox code. In order to compare these models, the LR test statistic calculated for non-nested hypotheses is obtained.