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A power ARCH (PARCH) model is a type of econometric model used to analyze and forecast time series data, particularly in financial markets, where volatility is often not constant. It extends the traditional ARCH (Autoregressive Conditional Heteroskedasticity) model by allowing for asymmetric effects of shocks on volatility and incorporating power transformations. This flexibility helps capture varying degrees of volatility clustering and leverage effects, making it suitable for modeling asset returns that exhibit such behaviors. PARCH models are valuable in risk management and derivative pricing, providing deeper insights into market dynamics.

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