A comparison of the moving averag, garth ( I I) and arch volatility models as measure of returns
Abstract
Many empirical studies have shown strong evidence against some of the underlying
assumptions of the Black Scholes Model. However this paper has focussed on the constant
value that is assumed for the volatility. Empirical research shows that the volatility of
financial asset prices is following a stochastic process and varies through time. This paper has
highlighted the different that determine volatility, and some of them act as alternatives or
improvement from earlier models.
We have compared three models: ARCH, GARCH and the Moving Average Model. GARCH
is a good description of the evolution of the variance process of the asset returns. It provides
a better evolution of asset returns than compared to the ARCH model. It also captures
volatility clustering quite well.
Sponsorhip
University of NairobiPublisher
School of mathematics