McNelis, Paul; Neftci, Salih - Hong Kong Institute for Monetary Research (HKIMR), … - 2004
In this paper we investigate the dynamics of Hong Kong cap-floor volatilities and compare their dynamics with the US cap-floor volatilities. We use linear and non-linear factor models and VAR¡¦s. The results show that the first principal components, both linear and non-linear, do a very good...