Stochastic Volatility in Financial Markets presents advanced topics in
financial econometrics and theoretical finance, and 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 for at least 20 years; in this
part, further, useful theoretical properties of conditionally
heteroskedastic models are uncovered. The second part goes beyond the
statistical aspects of stochastic volatility models: it constructs and
uses new fully articulated, theoretically-sounded financial asset
pricing models that allow for the presence of conditional
heteroskedasticity. The third part shows how the inclusion of the
statistical aspects of stochastic volatility in a rigorous economic
scheme can be faced from an empirical standpoint.