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Which one of the following problems in finance could not be usefully addressed by a GARCH model ? Select the right answer : a
Which one of the following problems in finance could not be usefully addressed by a GARCH model ?
Select the right answer :
a. Producing dynamic hedge ratios
b. Producing correlation forecasts for value at risk models
c. Producing forecasts of returns for use in trading models
d. Producing option prices
e. Producing time-varying beta estimates for a stock
Expert Solution
ANSWER -
Producing correlation forecasts for value at risk models can be adressed using multivariate method
Volatility clustering is the tendency for financial asset return volatility to appear in bunches.
in other words, the tendency of large changes in prices of financial assets to cluster together
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