In Comparing the ARCH $( q )$ Model with GARCH $( p , q )$

question 6

Multiple Choice

In comparing the ARCH $( q )$ model with GARCH $( p , q )$ for $p \geq 1$ , which of the following statements is most likely to be valid?

• A) The GARCH model always delivers a higher volatility than the ARCH model because of the extra terms in the variance equation.
• B) The GARCH model is aimed at delivering more persistent volatility.
• C) The volatility of volatility is lower in the GARCH model than in ARCH.
• D) The volatility of volatility is higher in the GARCH model than in ARCH.

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Definitions:

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