Which of the following are NOT features of an IGARCH(1,1) model? xii (i) Forecasts of the conditional variance will converge upon the unconditional variance as the horizon tends to infinity (ii) The sum of the coefficients on the lagged squared error and the lagged conditional variance will be unity (iii) Forecasts of the conditional variance will decline gradually towards zero as the horizon tends to infinity (iv) Such models are never observed in reality. (a) (ii) only (b) (ii) and (iv) only (c) (ii), (iii), and (iv) only (d) (i), (ii), (iii), and (iv)

Which of the following would represent the most appropriate definition for implied volatility? xiii (a) It is the volatility of the underlying assets returns implied from the price of a traded option and an option pricing model (b) It is the volatility of the underlying assets returns implied from a statistical model such as GARCH (c) It is the volatility of an option price implied from a statistical model such as GARCH (d) It is the volatility of an option price implied from the underlying asset volatility.

Suppose that a researcher wanted to obtain an estimate of realised (actual) volatility. Which one of the following is likely to be the most accurate measure of volatility of stock returns for a particular day? xiv (a) The price range (high minus low) on that day (b) The squared return on that day (c) The sum of the squares of hourly returns on that day (d) The squared return on the previous day.