Question: A stochastic volatility model is Yt t et log2t !log2t 1 ut where et and ut are independent i.i.d. N(0,1) shocks. (a) Write

A stochastic volatility model is Yt Æ ¾t et log¾2t

Æ !ůlog¾2t

¡1 Åut where et and ut are independent i.i.d. N(0,1) shocks.

(a) Write down an information set for which Yt is aMDS.

(b) Show that if

¯¯

¯

¯¯

Ç 1 then Yt is strictly stationary and ergodic.

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