A comparison of the moving averag, garth ( I I) and arch volatility models as measure of returns

Abstract

Many empirical studies have shown strong evidence against some of the underlying assumptions of the Black Scholes Model. However this paper has focussed on the constant value that is assumed for the volatility. Empirical research shows that the volatility of financial asset prices is following a stochastic process and varies through time. This paper has highlighted the different that determine volatility, and some of them act as alternatives or improvement from earlier models. We have compared three models: ARCH, GARCH and the Moving Average Model. GARCH is a good description of the evolution of the variance process of the asset returns. It provides a better evolution of asset returns than compared to the ARCH model. It also captures volatility clustering quite well.