October 3-4, 2018 | Faculty of Economics, University of Coimbra
| Professor Stephen J. Taylor (about)|
The course commences with a review of the key empirical properties of asset returns, initially for daily returns and then for intraday, high-frequency returns.
Volatility clustering is emphasised and motivates the material in the second lecture about ARCH models for daily returns.
Methods for forecasting volatility are explained in the third lecture making use firstly of daily and high-frequency asset returns and secondly daily measures of implied volatility revealed by options prices.
Finally, the more challenging task of forecasting the density of a future asset price is explored, now relying on the information provided by all traded option prices. Empirical illustrations are provided for stock indices and exchange rates.