A study of volatility prediction techniques and an anlysis of their performance

Abstract

In recent times the study of volatility has grown very important. The current economic scenario shows most of the stock markets and financial instruments under stress due to the strong linkages between stock, currencies, commodities and derivatives. Most of the market participants, regulators and other researchers have take an active interest in this field. A lot of studies have been conducted to predict volatility and measures to manage and forecasts risks. Participants are increasingly coming up with volatility related products like variance swaps and volatility linked instruments to tap this field. A good measure to predicting volatility could go a long way in predicting insight into these products and increase their attractiveness. Through this study, we aim to develop an understanding of the past volatility prediction and forecasting methods. We would also aim to understand the importance of this indicator and find applications of artificial intelligence techniques in estimating it in Indian stock markets.