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Author : Hong Jiang
Publisher :
ISBN 13 :
Total Pages : 125 pages
Book Rating : 4.:/5 (915 download)
Download or read book A Stochastic Volatility Model with Leverage Effect and Regime Switching written by Hong Jiang and published by . This book was released on 2014 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jun Yu
Publisher :
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (129 download)
Download or read book On Leverage in a Stochastic Volatility Model written by Jun Yu and published by . This book was released on 2013 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is concerned with specification for modelling financial leverage effect in the context of stochastic volatility (SV) models. Two alternative specifications co-exist in the literature. One is the Euler approximation to the well known continuous time SV model with leverage effect and the other is the discrete time SV model of Jacquier, Polson and Rossi (2004, Journal of Econometrics, forthcoming). Using a Gaussian nonlinear state space form with uncorrelated measurement and transition errors, I show that it is easy to interpret the leverage effect in the conventional model whereas it is not clear how to obtain the leverage effect in the model of Jacquier et al. Empirical comparisons of these two models via Bayesian Markov chain Monte Carlo (MCMC) methods reveal that the specification of Jacquier et al is inferior. Simulation experiments are conducted to study the sampling properties of the Bayes MCMC for the conventional model.
Author : Garland Durham
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book Beyond Stochastic Volatility and Jumps in Returns and Volatility written by Garland Durham and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: While a great deal of attention has been focused on stochastic volatility in stock returns, there is strong evidence suggesting that return distributions have time-varying skewness and kurtosis as well. Under the risk-neutral measure, for example, this can be seen from variation across time in the shape of Black-Scholes implied volatility smiles. This paper investigates model characteristics that are consistent with variation in the shape of return distributions using a stochastic volatility model with a regime-switching feature to allow for random changes in the parameters governing volatility of volatility, leverage effect and jump intensity. The analysis consists of two steps. First, the models are estimated using only information from observed returns and option-implied volatility. Standard model assessment tools indicate a strong preference in favor of the proposed models. Since the information from option-implied skewness and kurtosis is not used in fitting the models, it is available for diagnostic purposes. In the second step of the analysis, regressions of option-implied skewness and kurtosis on the filtered state variables (and some controls) suggest that the models have strong explanatory power for these characteristics.
Download or read book Research Report written by and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sebastian Trojan
Publisher :
ISBN 13 :
Total Pages : 70 pages
Book Rating : 4.:/5 (876 download)
Download or read book Regime Switching Stochastic Volatility with Skew, Fat Tails and Leverage Using Returns and Realized Volatility Contemporaneously written by Sebastian Trojan and published by . This book was released on 2013 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ionut Florescu
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (13 download)
Download or read book A Study About the Existence of the Leverage Effect in Stochastic Volatility Models written by Ionut Florescu and published by . This book was released on 2018 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: The empirical relationship between the return of an asset and the volatility of the asset has been well documented in the financial literature. Named the leverage e ffect or sometimes risk-premium effect, it is observed in real data that, when the return of the asset decreases, the volatility increases and vice-versa.Consequently, it is important to demonstrate that any formulated model for the asset price is capable to generate this eff ect observed in practice. Furthermore, we need to understand the conditions on the parameters present in the model that guarantee the apparition of the leverage effect. In this paper we analyze two general speci cations of stochastic volatility models and their capability of generating the perceived leverage effect. We derive conditions for the apparition of leverage e ffect in both of these stochastic volatility models. We exemplify using stochastic volatility models used in practice and we explicitly state the conditions for the existence of the leverage effect in these examples.
Author : Dinghai Xu
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (837 download)
Download or read book Empirical Evidence of the Leverage Effect in a Stochastic Volatility Model written by Dinghai Xu and published by . This book was released on 2010 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Ole Eiler Barndorff-Nielsen
Publisher :
ISBN 13 :
Total Pages : 18 pages
Book Rating : 4.:/5 (247 download)
Download or read book Incorporation of a Leverage Effect in a Stochastic Volatility Model written by Ole Eiler Barndorff-Nielsen and published by . This book was released on 1998 with total page 18 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Agnès Grimaud
Publisher :
ISBN 13 :
Total Pages : 16 pages
Book Rating : 4.:/5 (897 download)
Download or read book Estimation for Mean-reverting Stochastic Volatility Models with a Leverage Effect written by Agnès Grimaud and published by . This book was released on 2006 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Amaan Mehrabian
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (841 download)
Download or read book The Leverage Effect in Stochastic Volatility written by Amaan Mehrabian and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: A striking empirical feature of many financial time series is that when the price drops, the future volatility increases. This negative correlation between the financial return and future volatility processes was initially addressed in Black 76 and explained based on financial leverage, or a firm's debt-to-equity ratio: when the price drops, financial leverage increases, the firm becomes riskier, and hence, the future expected volatility increases. The phenomenon is, therefore, traditionally been named the leverage effect. In a discrete time Stochastic Volatility (SV) model framework, the leverage effect is often modelled by a negative correlation between the innovation processes of return and volatility equations. These models can be represented as state space models in which the returns and the volatilities are considered as the observed and the latent state variables respectively. Including the leverage effect in the SV model not only results in a better fit ...
Author : Philippe J. Deschamps
Publisher :
ISBN 13 :
Total Pages : 41 pages
Book Rating : 4.:/5 (13 download)
Download or read book Alternative Formulations of the Leverage Effect in a Stochastic Volatility Model with Asymmetric Heavy-Tailed Errors written by Philippe J. Deschamps and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates three formulations of the leverage effect in a stochastic volatility model with a skewed and heavy-tailed observation distribution. The first formulation is the conventional one, where the observation and evolution errors are correlated. The second is a hierarchical one, where log-volatility depends on the past log-return multiplied by a time-varying latent coefficient. In the third formulation, this coefficient is replaced by a constant. The three models are compared with each other and with a GARCH formulation, using Bayes factors. MCMC estimation relies on a parametric proposal density estimated from the output of a particle smoother. The results, obtained with recent S&P500 and Swiss Market Index data, suggest that the last two leverage formulations strongly dominate the conventional one. The performance of the MCMC method is consistent across models and sample sizes, and its implementation only requires a very modest (and constant) number of filter and smoother particles.
Author : Antoine Lejay
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (13 download)
Download or read book A Threshold Model for Local Volatility written by Antoine Lejay and published by . This book was released on 2019 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: In financial markets, low prices are generally associated with high volatilities and vice-versa, this well known stylized fact usually being referred to as leverage effect.We propose a local volatility model, given by a stochastic differential equation with piecewise constant coefficients, which accounts of leverage and mean-reversion effects in the dynamics of the prices. This model exhibits a regime switch in the dynamics accordingly to a certain threshold. It can be seen as a continuous time version of the Self-Exciting Threshold Autoregressive (SETAR) model. We propose an estimation procedure for the volatility and drift coefficients as well as for the threshold level. Tests are performed on the daily prices of 21 assets. They show empirical evidence for leverage and mean-reversion effects, consistent with the results in the literature.
Author : Mike K. P. So
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (4 download)
Download or read book A Stochastic Volatility Model with Markov Switching written by Mike K. P. So and published by . This book was released on 1997 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Joann Jasiak
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Stochastic Volatility and Time Deformation written by Joann Jasiak and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we study stochastic volatility models with time deformation. Such processes relate to the early work by Mandelbrot and Taylor (1967), Clark (1973), Tauchen and Pitts (1983), among others. In our setup, the latent process of stochastic volatility evolves in an operational time which differs from calendar time. The time deformation can be determined by past volume of trade, past returns, possibly with an asymmetric leverage effect, and other variables setting the pace of information arrival. The econometric specification exploits the state-space approach for stochastic volatility models proposed by Harvey, Ruiz and Shephard (1994) as well as the matching moment estimation procedure using SNP densities of stock returns and trading volume estimated by Gallant, Rossi and Tauchen (1992). Daily data on returns and trading volume of the NYSE are used in the empirical application. Supporting evidence for a time deformation representation is found and its impact on the behavior of returns and volume is analyzed. We find that increases in volume accelerate operational time, resulting in volatility being less persistent and subject to shocks with a higher innovation variance. Downward price movements have similar effects while upward price movements increase the persistence in volatility and decrease the dispersion of shocks by slowing down market time. We present the basic model as well as several extensions; in particular, we formulate and estimate a bivariate return-volume stochastic volatility model with time deformation. The latter is examined through bivariate impulse response profiles following the example of Gallant, Rossi and Tauchen (1993).
Author : Daniel R. Smith
Publisher :
ISBN 13 :
Total Pages : 24 pages
Book Rating : 4.:/5 (129 download)
Download or read book A Stochastic Volatility Model with Fat Tails, Skewness and Leverage Effects written by Daniel R. Smith and published by . This book was released on 2007 with total page 24 pages. Available in PDF, EPUB and Kindle. Book excerpt: We develop a new stochastic volatility model that captures the three most important features of stock index returns: negative correlation between returns and future volatility, excess kurtosis and negative skewness. We estimate the model parameters by maximum likelihood using a numerical integration-based filter to deal with the latent nature of volatility. In this approach different models are defined by varying the joint density of returns and future volatility conditional on current volatility. Our innovation is to construct the joint conditional density using a copula. This approach is tremendously flexible and allows the econometrician to choose the marginal distribution of both returns and volatility independently and then stitch them together using a copula, which is also chosen independently, to form the joint density. We also develop conditional moment-based model specification tests for the extent to which the various stochastic volatility models are able to capture the skewness and excess kurtosis we observe in practice. The parameter estimates and conditional moment tests indicate that leverage effects, excess kurtosis and skewness are all crucial for modeling stock returns.
Author : Bent Jesper Christensen
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (837 download)
Download or read book The Risk-return Tradeoff and Leverage Effect in a Stochastic Volatility-in-mean Model written by Bent Jesper Christensen and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Jouchi Nakajima
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (318 download)
Download or read book EGARCH and Stochastic Volatility written by Jouchi Nakajima and published by . This book was released on 2008 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This paper proposes the EGARCH [Exponential Generalized Autoregressive Conditional Heteroskedasticity] model with jumps and heavy-tailed errors, and studies the empirical performance of different models including the stochastic volatility models with leverage, jumps and heavy-tailed errors for daily stock returns. In the framework of a Bayesian inference, the Markov chain Monte Carlo estimation methods for these models are illustrated with a simulation study. The model comparison based on the marginal likelihood estimation is provided with data on the U.S. stock index."--Author's abstract.
