characterized by volatility clustering and asymmetry. Also revealed as a stylized fact is Long memory or long range dependence in … market volatility, with significant impact on pricing and forecasting of market volatility. The implication is that models … that accomodate long memory hold the promise of improved long-run volatility forecast as well as accurate pricing of long …

The volatility clustering observed in financial market data implies that large net yield shocks increase the … probability of a higher future volatility during the price formation. Starting from the ARCH models which were suggested by Engle …