Stochastic Volatility: Selected Readings

Collects sixteen of the main papers that have influenced the econometrics of stochastic volatility, which is associated with financial economics and mathematical finance. Papers discuss a subordinated stochastic process model with finite variance for speculative prices; a study of daily sugar prices, 1961-79; the behavior of random variables with nonstationary variance and the distribution of security prices; the pricing of options on assets with stochastic volatilities; the dynamics of exchange rate volatility; multivariate stochastic variance models; stochastic autoregressive volatility; long memory in continuous-time stochastic volatility models; Bayesian analysis of stochastic volatility models; stochastic volatility, likelihood inference, and a comparison with ARCH models; estimation of stochastic volatility models with diagnostics; pricing foreign currency options with stochastic volatility; a closed-form solution for options with stochastic volatility, with applications to bond and currency options; a unified approach to the joint estimation of objective and risk neutral measures for the purpose of options valuation; the distribution of realized exchange rate volatility; and econometric analysis of realized volatility and its use in estimating stochastic volatility models. Neil Shephard is Professor of Economics and Official Fellow in Economics at Nuffield College, University of Oxford, on the Editorial Board of the Review of Economic Studies, and Associate Editor of Econometrica. Author and subject indexes