Volatility clustering is i (a) The tendency for financial asset returns to have distributions that exhibit fat tails (b) The tendency for financial asset return volatility to appear in bunches (c) The tendency for volatility to rise more following a large price fall than following a price rise of the same magnitude (d) All of the above

Which of the following is TRUE about ARCH and GARCH models? ii (I) They are used for modelling and forecasting volatility (II) They are non-linear models (III) They can both be estimated using OLS (IV) Series estimated using these models must have a unit root process. (a) I only (b) I and II only (c) I, II, and III only (d) I, II, III, and IV.

Which of the following statements are true regarding volatility: iii (I) It measures the total risk of financial assets (II) It can be used in computing value-at-risk (III) It is a component of the BlackScholes formula for deriving the prices of traded options (IV) It can be estimated using the variance of asset returns. (a) I only (b) I and II only (c) I, II, and III only (d) I, II, III, and IV.