AI engineering glossary · Time series recsys
What is volatility clustering?
Volatility clustering: The observed tendency of large changes to be followed by large changes and small ones by small ones, regardless of direction. It is common in financial returns and is the reason models with time-varying variance are used.
Volatility clustering: an example
Nifty daily returns show calm weeks and turbulent weeks, rather than uniform swings.
Related terms
- GARCH model
- ARCH model
- Heteroskedasticity
- Autocorrelation
More Time series recsys terms
- Weak stationarity
- Weighted absolute percentage error
- White noise
- Wide and Deep
- Additive decomposition
- Alternating least squares
- Anomaly detection (time series)
- ARCH model
Where you learn it
Volatility clustering is part of the AI Engineering Program, which teaches it with notes, a hands-on lab and an exam. The first lesson is free.