3. Conditional Heteroscedastic Models

  1. Ruey S. Tsay

Published Online: 2 AUG 2010

DOI: 10.1002/9780470644560.ch3

Analysis of Financial Time Series, Third Edition, Third Edition

Analysis of Financial Time Series, Third Edition, Third Edition

How to Cite

Tsay, R. S. (2010) Conditional Heteroscedastic Models, in Analysis of Financial Time Series, Third Edition, Third Edition, John Wiley & Sons, Inc., Hoboken, NJ, USA. doi: 10.1002/9780470644560.ch3

Author Information

  1. The University of Chicago Booth School of Business, Chicago, IL, USA

Publication History

  1. Published Online: 2 AUG 2010
  2. Published Print: 13 AUG 2010

Book Series:

  1. Wiley Series in Probability and Statistics

Book Series Editors:

  1. Walter A. Shewhart and
  2. Samuel S. Wilks

ISBN Information

Print ISBN: 9780470414354

Online ISBN: 9780470644560



  • asset return;
  • autoregressive conditional heteroscedastic (ARCH) model;
  • conditional heteroscedastic autoregressive moving-average (CHARMA) model;
  • exponential GARCH (EGARCH) model;
  • generalized ARCH (GARCH) model;
  • random coefficient autoregressive (RCA) model;
  • stochastic volatility (SV) models;
  • threshold GARCH (TGARCH) model;
  • volatility modeling


The objective of this chapter is to study some methods and econometric models available in the literature for modeling the volatility of an asset return. The models are referred to as conditional heteroscedastic models. The univariate volatility models discussed in the chapter include the autoregressive conditional heteroscedastic (ARCH) model, the generalized ARCH (GARCH) model, the exponential GARCH (EGARCH) model, the threshold GARCH (TGARCH) model, the conditional heteroscedastic autoregressive moving-average (CHARMA) model, the random coefficient autoregressive (RCA) model, and the stochastic volatility (SV) models. The chapter discusses advantages and weaknesses of each volatility model and shows some applications of the models. It describes some alternative approaches to volatility modeling, including use of daily high and low prices of an asset.

Controlled Vocabulary Terms

ARMA model; autoregressive conditional heteroskedasticity; exponential general autoregressive conditional heteroskedasticity; generalized autoregressive conditional heteroskedasticity