In statistics, stochastic volatility models are those in which the variance of a stochastic process
is itself randomly distributed. They are used in the field of mathematical finance to evaluate
derivative securities, such as options. Virtually all the financial uses of volatility models
entail forecasting aspects of future returns. Typically a volatility model is used to forecast the
absolute magnitude of returns, but it may also be used to predict quantiles or, in fact, the entire
density.
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