Explain 'GARCH' models.

Explain 'GARCH' models.

Approach: Describe models used to estimate and forecast volatility in financial markets.

Generalized Autoregressive Conditional Heteroskedasticity. Models used to analyze and forecast volatility by accounting for the fact that variance in time series data changes over time (volatility clustering).

Follow-up: What is the difference between ARCH and GARCH?

Key concepts: heteroskedasticity, volatility clustering, arch.