Chapter written for the Handbook of Volatility Models and their Applications, edited by Luc Bauwens, Christian Hafner …, and Sébastien Laurent, forthcoming in 2012 (John Wiley & sons). This chapter presents an introductory review of volatility …

Nowcasting volatility of financial time series appears difficult with classical volatility models. This paper proposes … volatility, given past and current returns, in a very simple way. The model can be viewed as a degenerate case of the stochastic … volatility model with perfect correlation between the two error terms. It is shown that the volatility nowcasts do not depend on …

assumptions concerning the volatility process (historical, realized, implied, stochastic or based on GARCH model). In order to … show some patterns in option pricing and to check the robustness of our results. The Black model with implied volatility … (BIV) comes out as the best one. Highest average pricing errors we obtain for the Black model with realized volatility (BRV …

Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits … asymmetric leverage e®ects relative to returns. At the same time, the volatility risk premium, de¯ned by the di®erence between … the risk-neutral and objective expectations of the volatility, is distinctly less persistent and appears short …