During the financial crisis, financial firm leverage and volatility both rose dramatically. Consequently, institutions … structure in volatility. To address this question, we build a statistical model of equity volatility that accounts for leverage …. Our approach blends Merton's insights on capital structure with traditional time-series models of volatility. Using our …

stock return data, which includes both features and allows the co-existence of long memory in volatility and short memory in … returns. We extend this model to allow the financial parameters governing the volatility-in-mean effect and the leverage …