GARCH models
A) Are discrete-time expressions of stochastic volatility models.
B) Are designed to capture the empirically-observed leverage effect in equity returns.
C) Are models in which volatility is not separately stochastic but evolves in a manner dependent on the stock return process.
D) Are useful for describing stock returns empirically but not for pricing options on equity.
Correct Answer:
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Q17: The asymmetric GARCH model was developed to
Q18: The current stock price is $100.A $101--strike
Q19: Which of the following assumptions made in
Q20: An option-trading firm is using the Black-Scholes
Q21: The Merton (1976)model
A)Modifies the Black-Scholes model by
Q23: The Heston (1993)model generalizes the Black-Scholes setting
Q24: By augmenting the geometric Brownian motion process
Q25: If the implied volatility surface is flat
Q26: Stochastic volatility models commonly assume
A)There are jumps
Q27: Local volatility models
A)Look to describe volatility
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