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| Author | : Jun Yu |
| Publisher | : |
| Total Pages | : 18 |
| Release | : 2004 |
| Genre | : Bayesian statistical decision theory |
| ISBN | : |
This paper is concerned with specification for modelling finanical leverage effect in the context of stochastic volatility models.
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| Release | : 1998 |
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| Author | : Hong Jiang |
| Publisher | : |
| Total Pages | : 125 |
| Release | : 2014 |
| Genre | : Asset-liability management |
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| Author | : Ole Eiler Barndorff-Nielsen |
| Publisher | : |
| Total Pages | : 18 |
| Release | : 1998 |
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| Author | : Ionut Florescu |
| Publisher | : |
| Total Pages | : 25 |
| Release | : 2018 |
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| ISBN | : |
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 | : Josep Perelló |
| Publisher | : |
| Total Pages | : 19 |
| Release | : 2013 |
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| ISBN | : |
Financial time series exhibit two different type of non linear correlations: (i) volatility autocorrelations that have a very long range memory, on the order of years, and (ii) asymmetric return-volatility (or 'leverage') correlations that are much shorter ranged. Different stochastic volatility models have been proposed in the past to account for both these correlations. However, in these models, the decay of the correlations is exponential, with a single time scale for both the volatility and the leverage correlations, at variance with observations. We extend the linear Ornstein-Uhlenbeck stochastic volatility model by assuming that the mean reverting level is itself random. We find that the resulting three-dimensional diffusion process can account for different correlation time scales. We show that the results are in good agreement with a century of the Dow Jones index daily returns (1900-2000), with the exception of crash days.
| Author | : Hoang Nguyen |
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| Total Pages | : |
| Release | : 2021 |
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| Author | : Philippe J. Deschamps |
| Publisher | : |
| Total Pages | : 41 |
| Release | : 2016 |
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| ISBN | : |
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 | : Dinghai Xu |
| Publisher | : |
| Total Pages | : 26 |
| Release | : 2010 |
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| Author | : Stephen J. Taylor |
| Publisher | : World Scientific |
| Total Pages | : 297 |
| Release | : 2008 |
| Genre | : Business & Economics |
| ISBN | : 9812770852 |
This book contains several innovative models for the prices of financial assets. First published in 1986, it is a classic text in the area of financial econometrics. It presents ARCH and stochastic volatility models that are often used and cited in academic research and are applied by quantitative analysts in many banks. Another often-cited contribution of the first edition is the documentation of statistical characteristics of financial returns, which are referred to as stylized facts. This second edition takes into account the remarkable progress made by empirical researchers during the past two decades from 1986 to 2006. In the new Preface, the author summarizes this progress in two key areas: firstly, measuring, modelling and forecasting volatility; and secondly, detecting and exploiting price trends. Sample Chapter(s). Chapter 1: Introduction (1,134 KB). Contents: Features of Financial Returns; Modelling Price Volatility; Forecasting Standard Deviations; The Accuracy of Autocorrelation Estimates; Testing the Random Walk Hypothesis; Forecasting Trends in Prices; Evidence Against the Efficiency of Futures Markets; Valuing Options; Appendix: A Computer Program for Modelling Financial Time Series. Readership: Academic researchers in finance & economics; quantitative analysts.
