Aarhus Universitets segl

English

Du er her: AU » Om AU » Organisation » Level Shifts in Volatility and the Implied-Realized Volat...

Om AU

Level Shifts in Volatility and the Implied-Realized Volatility Relation

Publikation: Working paper/Preprint › Working paper › Forskning

Dokumenter

  • Rp10 60

    Forlagets udgivne version, 346 KB, PDF-dokument

  • Institut for Økonomi
We propose a simple model in which realized stock market return volatility and implied volatility backed out of option prices are subject to common level shifts corresponding to movements between bull and bear markets. The model is estimated using the Kalman filter in a generalization to the multivariate case of the univariate level shift technique by Lu and Perron (2008). An application to the S&P500 index and a simulation experiment show that the recently documented empirical properties of strong persistence in volatility and forecastability of future realized volatility from current implied volatility, which have been interpreted as long memory (or fractional integration) in volatility and fractional cointegration between implied and realized volatility, are accounted for by occasional common level shifts.
OriginalsprogEngelsk
UdgivelsesstedAarhus
UdgiverInstitut for Økonomi, Aarhus Universitet
Antal sider38
StatusUdgivet - 2010

Se relationer på Aarhus Universitet Citationsformater

Download-statistik

Ingen data tilgængelig

ID: 21820099