GARCH

GARCH (Generalized Autoregressive Conditional Heteroskedasticity) is a statistical model used to analyze and forecast the volatility, or variability, of financial returns over time. It assumes that periods of high volatility tend to follow other high-volatility periods, and periods of low volatility follow low-volatility periods. This model helps in understanding and predicting changing risk levels in markets, which is crucial for investors and risk managers. Essentially, GARCH captures how unpredictable swings in prices can cluster together, providing a more accurate picture of future market behavior based on past patterns.