"Statistical measures of volatility are based on observed asset returns over a given time interval. This can be done in various ways. A simple, model-free approach is to compute the standard deviation of the actual returns on a given asset over a particular time window, so-called realised (or "historical") volatility. Model-based approaches have also been proposed: ARCH (autoregressive conditional heteroscedasticity) models, for example, assume that the variance of returns fluctuates over time according to a specific time series model.
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