GARCH Models

question 9

Multiple Choice

GARCH models

• A)Are discrete-time expressions of stochastic volatility models.
• B)Are designed to capture the empirically-observed leverage effect in equity returns.
• C)Are models in which volatility is not separately stochastic but evolves in a manner dependent on the stock return process.
• D)Are useful for describing stock returns empirically but not for pricing options on equity.

---

Definitions:

Insurable Interest

A stake in the preservation of a subject against loss or damage, legally necessary for an individual to purchase insurance on a life or property.

Property Insurance

A type of insurance covering loss or damage to physical property through accidents, theft, or natural disasters.

Legal Owner

The individual or entity that holds the legal title to property, providing them with the rights to control, use, and dispose of it.

Coinsurance Feature

A clause in an insurance policy that requires the policyholder to bear a portion of the risk by paying a certain percentage of the total claim amount.