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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

Stochastic volatility and stochastic leverage

Veraart, Almut E. D.; Veraart, Luitgard A. M. - School of Economics and Management, University of Aarhus - 2009

This paper proposes the new concept of stochastic leverage in stochastic volatility models. Stochastic leverage refers to a stochastic process which replaces the classical constant correlation parameter between the asset return and the stochastic volatility process. We provide a systematic...

Persistent link: https://www.econbiz.de/10004972835

Stochastic volatility of volatility in continuous time

Barndorff-Nielsen, Ole E.; Veraart, Almut E. D. - School of Economics and Management, University of Aarhus - 2009

This paper introduces the concept of stochastic volatility of volatility in continuous time and, hence, extends standard stochastic volatility (SV) models to allow for an additional source of randomness associated with greater variability in the data. We discuss how stochastic volatility of...

Persistent link: https://www.econbiz.de/10005025510

Volatility in Equilibrium: Asymmetries and Dynamic Dependencies

Bollerslev, Tim; Sizova, Natalia; Tauchen, George - School of Economics and Management, University of Aarhus - 2009

Stock market volatility clusters in time, carries a risk premium, is fractionally integrated, and exhibits asymmetric leverage effects relative to returns. This paper develops a first internally consistent equilibrium based explanation for these longstanding empirical facts. The model is cast in...

Persistent link: https://www.econbiz.de/10005787548

Exponential GARCH Modeling with Realized Measures of Volatility

Hansen, Peter Reinhard; Huang, Zhuo - School of Economics and Management, University of Aarhus - 2012

modeling of a return series. The model specifies the dynamic properties of both returns and realized measures, and is … characterized by a flexible modeling of the dependence between returns and volatility. We apply the model to DJIA stocks and an …

Persistent link: https://www.econbiz.de/10010851191

Microstructure Noise in the Continuous Case: The Pre-Averaging Approach - JLMPV-9

Jacod, Jean; Li, Yingying; Mykland, Per A.; Podolskij, Mark - School of Economics and Management, University of Aarhus - 2007

This paper presents a generalized pre-averaging approach for estimating the integrated volatility. This approach also provides consistent estimators of other powers of volatility – in particular, it gives feasible ways to consistently estimate the asymptotic variance of the estimator of the...

Persistent link: https://www.econbiz.de/10005787544

A Discrete-Time Model for Daily S&P500 Returns and Realized Variations: Jumps and Leverage Effects

Bollerslev, Tim; Kretschmer, Uta; Pigorsch, Christian; … - School of Economics and Management, University of Aarhus - 2007

We develop an empirically highly accurate discrete-time daily stochastic volatility model that explicitly distinguishes between the jump and continuoustime components of price movements using nonparametric realized variation and Bipower variation measures constructed from high-frequency intraday...

Persistent link: https://www.econbiz.de/10005198864

Realized GARCH: A Complete Model of Returns and Realized Measures of Volatility

Hansen, Peter Reinhard; Zhuo (Albert) Huang; Shek, … - School of Economics and Management, University of Aarhus

GARCH models have been successful in modeling financial returns. Still, much is to be gained by incorporating a … realized measure of volatility in these models. In this paper we introduce a new framework for the joint modeling of returns … equation that relates the observed realized measure to latent volatility. This equation facilitates a simple modeling of the …

Persistent link: https://www.econbiz.de/10008836606

Option Pricing using Realized Volatility

Stentoft, Lars - School of Economics and Management, University of Aarhus - 2008

In the present paper we suggest to model Realized Volatility, an estimate of daily volatility based on high frequency data, as an Inverse Gaussian distributed variable with time varying mean, and we examine the joint properties of Realized Volatility and asset returns. We derive the appropriate...

Persistent link: https://www.econbiz.de/10005440036

The Pearson diffusions: A class of statistically tractable diffusion processes

Sørensen, Michael; Forman, Julie Lyng - School of Economics and Management, University of Aarhus - 2007

The Pearson diffusions is a flexible class of diffusions defined by having linear drift and quadratic squared diffusion coefficient. It is demonstrated that for this class explicit statistical inference is feasible. Explicit optimal martingale estimating func- tions are found, and the...

Persistent link: https://www.econbiz.de/10005440039