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.

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Definitions:

Penetration Pricing Strategy

A marketing strategy that involves setting a low price for a new product during its initial phase to attract customers and gain market share.

Dumping

The practice of exporting goods at a price lower than the home market price, often considered unfair trade and a subject of international dispute.

Predatory Pricing

A strategy where a company sets very low prices for its products with the intention of driving competitors out of the market.

Computer Manufacturing

The industrial process of producing computer hardware components and assembling them into complete systems or products.