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Revealing the arcane: an introduction to the art of stochastic volatility models

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  • C13 - Estimation: General
  • C53 - Forecasting And Prediction Methods
  • Simulation Methods
  • C15 - Statistical Simulation Methods: General
  • C22 - Time-Series Models
  • Dynamic Quantile Regressions
  • Dynamic Treatment Effect Models
  • Mathematics


This essay is aimed to provide a straightforward and sufficiently accessible demonstration of some known procedures for stochastic volatility model. It reviews the important related concepts, gives informal derivations of the methods and can be useful as a cookbook for a novice. The exposition is confined to classical (non-Bayesian) framework and discrete-time formulations.

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