Not 100% sure I got it right here, but I believe GARCH can accomodate exogenous variables in accounting for changes in volatility, whereas ARCH merely uses lagged values of previous volatility to predict future volatility.

<t>So is diversification a type of hedging? Or is hedging a specific type of diversification? Or are hedging and diversification different things?I tend to think of hedging as something you do to protect against a specific known risk (I know that interest rates can change, but I want the credit spre...