Lehnert, Thorsten; Lin, Yuehao; Martelin, Nicolas - Luxembourg School of Finance, Faculté de droit, … - 2013
-reversion in volatility, those findings have been interpreted as evidence for overreaction in the options market. Focusing on a … risk-neutral volatility dynamics are substantially more persistent than the physical one. As a result, the empirical … observation of a strong reaction of longterm volatility would be consistent with perfectly rational behavior. We additionally show …
