2. ARCH Volatility Specifications

  1. Evdokia Xekalaki and
  2. Stavros Degiannakis

Published Online: 31 MAR 2010

DOI: 10.1002/9780470688014.ch2

ARCH Models for Financial Applications

ARCH Models for Financial Applications

How to Cite

Xekalaki, E. and Degiannakis, S. (2010) ARCH Volatility Specifications, in ARCH Models for Financial Applications, John Wiley & Sons, Ltd, Chichester, UK. doi: 10.1002/9780470688014.ch2

Author Information

  1. Department of Statistics Athens University of Economics and Business, Greece

Publication History

  1. Published Online: 31 MAR 2010
  2. Published Print: 16 APR 2010

ISBN Information

Print ISBN: 9780470066300

Online ISBN: 9780470688014



  • ARCH volatility specifications;
  • GARCH model;
  • model specifications;
  • quasi-maximum likelihood estimation


This chapter presents a number of univariate ARCH models and their estimation. The main features of what seem to be most widely used ARCH models are described, with emphasis on their practical relevance. The aim is to give the broad framework of the most important models used today in financial applications. In particular, an anthology of representations of ARCH models that have been considered in the literature, is provided. In the literature, a large number of specifications of ARCH models have been considered for the description of the characteristics of financial markets. The GARCH (p, q) model successfully captures several characteristics of financial time series, such as fat-tailed returns and volatility clustering. However, its structure imposes important limitations. The chapter provides estimation of five asymmetric ARCH specifications for the FTSE100 and S&P500 equity indices, the $/£ exchange rate and the price of gold bullion.

Controlled Vocabulary Terms

autoregressive conditional heteroskedasticity; generalized autoregressive conditional heteroskedasticity; quasi-experiment