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This article estimates stochastic volatility jump-diffusion processes using the continuous empirical characteristic function method based on the Joint characteristic function and the Marginal characteristic function. The emphasis is on the specification of jumps in the asset log-price. Out of...
Persistent link: https://www.econbiz.de/10005534195
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
Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects relative to returns. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective expectations of the...
Persistent link: https://www.econbiz.de/10008549029
The paper undertakes a non-parametric analysis of the very high frequency movements in stock market volatility using very finely sampled data on the S&P VIX index compiled by the CBOE. The data suggest that stock market volatility is best described as a pure jump process without a continuous...
Persistent link: https://www.econbiz.de/10008549052
This paper proposes a class of stochastic volatility (SV) models which offers an alternative to the one introduced in Andersen (1994). The class encompasses all standard SV models that have appeared in the literature, including the well known lognormal model, and allows us to empirically test...
Persistent link: https://www.econbiz.de/10005149106
Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage e®ects relative to returns. At the same time, the volatility risk premium, de¯ned by the di®erence between the risk-neutral and objective expectations of the...
Persistent link: https://www.econbiz.de/10008764951
Motivated by the implications from a stylized self-contained general equilibrium model incorporating the effects of time-varying economic uncertainty, we show that the difference between implied and realized variation, or the variance risk premium, is able to explain a non-trivial fraction of...
Persistent link: https://www.econbiz.de/10005114114
We appreciate the thorough review and very useful comments of Cheng, Ibraimi, Leippold, and Zhang. The suggestions have helped significantly to improve our original approximation formula and lead us to provide an exact solution under the Lin and Chang (2010) framework and we thank the editor to...
Persistent link: https://www.econbiz.de/10010870992
Properties of three well-known and frequently applied first-order models for modelling and forecasting volatility in financial series such as stock and exchange rate returns are considered. These are the standard Generalized Autoregressive Conditional Heteroskedasticity (GARCH), the Exponential...
Persistent link: https://www.econbiz.de/10005423881
This paper describes a maximum likelihood method for estimating the parameters of Heston's model of stochastic volatility using data on an underlying market index and the prices of options written on that index. Parameters of the physical measure (associated with the index) and the parameters of...
Persistent link: https://www.econbiz.de/10010584095