In this book we will present and apply methods specifically designed to model the financial
market but before starting to discuss the models we need to make a brief introduction to the
data that we will be working with.Our data consists on financial asset prices from several
stock exchanges with special attention to the New York Stock Exchange the London Stock
Exchange and the Lisbon Stock Exchange. Also we focused on stock and forex (foreign exchange
market) prices because these present higher volatility and volume (i.e. more trades) and the
data related to these assets is easier to obtain. Here volatility is a statistical measure of
the dispersion of returns for a given financial asset. It is often measured as either the
standard deviation or variance between returns from that same asset.Moving further we will
often use the terms stock exchange and financial market interchange-ably but they slightly di
er. The term financial market broadly refers to any marketplace where the trading of securities
occurs including the stock market bond market forex market and derivatives market among
others whilst the stock exchange is a facility where stockbro-kers and traders can buy and
sell securities such as shares of stock bonds and other financial instruments. However
whenever we refer to the financial market we will be referring to the stock exchange.