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Sign and Quantiles of the Realized Stock-Bond Correlation

Aslanidis, Nektarios; Christiansen, Charlotte - School of Economics and Management, University of Aarhus - 2010

We scrutinize the monthly realized stock-bond correlation based upon high frequency returns. In particular, we use a … predictable to a large extent with bond market liquidity being the most important variable. Moreover, stock market volatility …, inflation uncertainty, short rate volatility, and bond volatility have significant effects upon the sign. In addition, we use …

Persistent link: https://www.econbiz.de/10008525440

Inference for the jump part of quadratic variation of Itô semimartingales

Veraart, Almut - School of Economics and Management, University of Aarhus - 2008

Recent research has focused on modelling asset prices by Itô semimartingales. In such a modelling framework, the quadratic variation consists of a continuous and a jump component. This paper is about inference on the jump part of the quadratic variation, which can be estimated by the difference...

Persistent link: https://www.econbiz.de/10005440041

Impact of time–inhomogeneous jumps and leverage type effects on returns and realised variances

Veraart, Almut E. D. - School of Economics and Management, University of Aarhus - 2008

This paper studies the effect of time–inhomogeneous jumps and leverage type effects on realised variance calculations when the logarithmic asset price is given by a Lévy–driven stochastic volatility model. In such a model, the realised variance is an inconsistent estimator of the integrated...

Persistent link: https://www.econbiz.de/10005440052

Skewness Premium with Lévy Processes

Fajardo, José; Mordecki, Ernesto - School of Economics and Management, University of Aarhus - 2009

We study the skewness premium (SK) introduced by Bates (1991) in a general context using Lévy Processes. Under a symmetry condition Fajardo and Mordecki (2006) have obtained that SK is given by the Bate's x% rule. In this paper, we study SK under the absence of that symmetry condition. More...

Persistent link: https://www.econbiz.de/10005440070

Tails, Fears and Risk Premia

Bollerslev, Tim; Todorov, Viktor - School of Economics and Management, University of Aarhus - 2009

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

Persistent link: https://www.econbiz.de/10004980201

Tail Risk Premia and Return Predictability

Bollerslev, Tim; Todorov, Viktor; Xu, Lai - School of Economics and Management, University of Aarhus - 2014

The variance risk premium, defined as the difference between actual and risk-neutralized expectations of the forward aggregate market variation, helps predict future market returns. Relying on new essentially model-free estimation procedure, we show that much of this predictability may be...

Persistent link: https://www.econbiz.de/10011096183

Long Memory and Structural Breaks in Realized Volatility: An Irreversible Markov Switching Approach

Nonejad, Nima - School of Economics and Management, University of Aarhus - 2013

This paper proposes a model that simultaneously captures long memory and structural breaks. We model structural breaks through irreversible Markov switching or so-called change-point dynamics. The parameters subject to structural breaks and the unobserved states which determine the position of...

Persistent link: https://www.econbiz.de/10010851215

The Factor Structure in Equity Options

Christoffersen, Peter; Fournier, Mathieu; Jacobs, Kris - School of Economics and Management, University of Aarhus - 2013

Principal component analysis of equity options on Dow-Jones firms reveals a strong factor structure. The first principal component explains 77% of the variation in the equity volatility level, 77% of the variation in the equity option skew, and 60% of the implied volatility term structure across...

Persistent link: https://www.econbiz.de/10010851218

Sticky continuous processes have consistent price systems

Bender, Christian; Pakkanen, Mikko S.; Sayit, Hasanjan - School of Economics and Management, University of Aarhus - 2013

Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous, multi-asset price process has a consistent price system, under...

Persistent link: https://www.econbiz.de/10010851256

The Effects of Interest Rate Movements on Assets’ Conditional Second Moments

Palandri, Alessandro - School of Economics and Management, University of Aarhus - 2009

This paper investigates whether the short term interest rate may explain the movements observed in the conditional second moments of asset returns. The theoretical connections between these seemingly unrelated quantities are studied within the C-CAPM framework. Under the assumption that the...

Persistent link: https://www.econbiz.de/10005037436