Fabio Fornari - Böcker

Presenting advanced topics in financial econometrics and theoretical finance, this guide is divided into three main parts. The first part aims at documenting an empirical regularity of financial price changes: the occurrence of sudden and persistent changes of financial markets volatility. This phenomenon, technically termed "stochastic volatility", or "conditional heteroskedasticity", has been well known since before 1980; in this part, further useful theoretical properties of conditionally heteroskedastic models are uncovered. The second section goes beyond the statistical aspects of stochastic volatility models: it constructs and uses fully articulated, theoretically-sounded financial asset pricing models that allow for the presence of conditional heteroskedasticity. The third part demonstrates how the inclusion of the statistical aspects of stochastic volatility in a rigorous economic scheme can be faced from an empirical standpoint.