Franses, Ph.H.B.F.; Leij, M.J. van der; Paap, R. - Erasmus University Rotterdam, Econometric Institute - 2005
The GARCH model and the Stochastic Volatility [SV] model are competing but non-nested models to describe unobserved … volatility in asset returns. We propose a GARCH model with an additional error term, which can capture SV model properties, and … which can be used to test GARCH against SV. We discuss model representation, parameter estimation and a simple test for …
