Financial models with long-tailed distributions and volatility clustering

Financial models that incorporate long-tailed distributions and volatility clustering are designed to better capture the complexities and dynamics of financial time series data. Let's break down these concepts: ### Long-Tailed Distributions 1. **Definition**: A long-tailed distribution is a probability distribution that features a large number of occurrences far from the "head" of the distribution (i.e., the high-probability region).