Download or read book Regime Switching Stochastic Volatility and Its Empirical Analysis written by Lu Zhang and published by . This book was released on 2010 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Regime Switching Stochastic Volatility and Its Empirical Analysis written by Lu Zhang and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Stochastic Volatility and Realized Stochastic Volatility Models written by Makoto Takahashi and published by Springer Nature. This book was released on 2023-04-18 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This treatise delves into the latest advancements in stochastic volatility models, highlighting the utilization of Markov chain Monte Carlo simulations for estimating model parameters and forecasting the volatility and quantiles of financial asset returns. The modeling of financial time series volatility constitutes a crucial aspect of finance, as it plays a vital role in predicting return distributions and managing risks. Among the various econometric models available, the stochastic volatility model has been a popular choice, particularly in comparison to other models, such as GARCH models, as it has demonstrated superior performance in previous empirical studies in terms of fit, forecasting volatility, and evaluating tail risk measures such as Value-at-Risk and Expected Shortfall. The book also explores an extension of the basic stochastic volatility model, incorporating a skewed return error distribution and a realized volatility measurement equation. The concept of realized volatility, a newly established estimator of volatility using intraday returns data, is introduced, and a comprehensive description of the resulting realized stochastic volatility model is provided. The text contains a thorough explanation of several efficient sampling algorithms for latent log volatilities, as well as an illustration of parameter estimation and volatility prediction through empirical studies utilizing various asset return data, including the yen/US dollar exchange rate, the Dow Jones Industrial Average, and the Nikkei 225 stock index. This publication is highly recommended for readers with an interest in the latest developments in stochastic volatility models and realized stochastic volatility models, particularly in regards to financial risk management.
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:
Download or read book Stochastic Volatility written by Neil Shephard and published by OUP Oxford. This book was released on 2005-03-10 with total page 536 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stochastic volatility is the main concept used in the fields of financial economics and mathematical finance to deal with time-varying volatility in financial markets. This book brings together some of the main papers that have influenced the field of the econometrics of stochastic volatility, and shows that the development of this subject has been highly multidisciplinary, with results drawn from financial economics, probability theory, and econometrics, blending to produce methods and models that have aided our understanding of the realistic pricing of options, efficient asset allocation, and accurate risk assessment. A lengthy introduction by the editor connects the papers with the literature.
Download or read book Long Memory and Regime Switching written by Francis X. Diebold and published by . This book was released on 2000 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: The theoretical and empirical econometric literatures on long memory and regime switching have evolved largely independently, as the phenomena appear distinct. We argue, in contrast, that they are intimately related, and we substantiate our claim in several environments, including a simple mixture model, Engle and Lee's (1999) stochastic permanent break model, and Hamilton's (1989) Markov switching model. In particular, we show analytically that stochastic regime switching is easily confused with long memory, even asymptotically, so long as only a small' amount of regime switching occurs, in a sense that we make precise. A Monte Carlo analysis supports the relevance of the theory and produces additional insights.
Download or read book Regime switching Stochastic Volatility and Short term Interest Rates written by Raúl Susmel and published by . This book was released on 2001 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Regime Switching Heston Model for VIX and S P 500 Implied Volatilities written by Andrew Papanicolaou and published by . This book was released on 2014 with total page 27 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatility products have become popular in the past 15 years as a hedge against market uncertainty. In particular, there is growing interest in options on the VIX volatility index. A number of recent empirical studies examine whether there is significantly greater risk premium in VIX option prices compared with S&P 500 option prices. We address this issue by proposing and analyzing a stochastic volatility model with regime switching. The basic Heston model cannot capture VIX implied volatilities, as has been documented. We show that the incorporation sharp regime shifts can bridge this shortcoming. We take advantage of Fourier methods to make the extension tractable, and we present a fit to data, both in times of crisis and relative calm, which shows the effectiveness of the regime switching.
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:
Download or read book An Empirical Analysis of Stochastic Volatility Models written by Adrien-Paul Lambillon and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The aim of this paper is to explain and apply the stochastic volatility models of Heston and GARCH to model the S&P 500 index volatility. The maximum likelihood estimate of the CIR process in the volatility equation of the Heston model and GARCH(1,1) with different underlying distributions are compared. It is shown that the model with strongest mean reversion, the CIR model, is the best volatility estimation for the overall period. For periods of volatility clustering, however, GARCH models capture the behaviour more accurately.
Download or read book Options Pricing and Hedging in a Regime Switching Volatility Model written by Melissa Anne Mielkie and published by . This book was released on 2014 with total page 320 pages. Available in PDF, EPUB and Kindle. Book excerpt: Both deterministic and stochastic volatility models have been used to price and hedge options. Observation of real market data suggests that volatility, while stochastic, is well modelled as alternating between two states. Under this two-state regime-switching framework, we derive coupled pricing partial differential equations (PDEs) with the inclusion of a state-dependent market price of volatility risk (MPVR) term. Since there is no closed-form solution for this pricing problem, we apply and compare two approaches to solving the coupled PDEs, assuming constant Poisson intensities. First we solve the problem using numerical solution techniques, through the application of the Crank- Nicolson numerical scheme. We also obtain approximate solutions in terms of known Black- Scholes formulae by reformulating our problem and applying the Cauchy-Kowalevski PDE theorem. Both our pricing equations and our approximate solutions give way to the analysis of the impact of our state-dependent MPVR on theoretical option prices. Using financially intuitive constraints on our option prices and Deltas, we prove the necessity of a negative MPVR. An exploration of the regime-switching option prices and their implied volatilities is given, as well as numerical results and intuition supporting our mathematical proofs. Given our regime-switching framework, there are several different hedging strategies to investigate. We consider using an option to hedge against a potential regime shift. Some practical problems arise with this approach, which lead us to set up portfolios containing a basket of two hedging options. To be more precise, we consider the effects of an option going too far in- and out-of-the-money on our hedging strategy, and introduce limits on the magnitude of such hedging option positions. A complementary approach, where constant volatility is assumed and investor's risk preferences are taken into account, is also analysed. Analysis of empirical data supports the hypothesis that volatility levels are a effected by upcoming financial events. Finally, we present an extension of our regime-switching framework with deterministic Poisson intensities. In particular, we investigate the impact of time and stock varying Poisson intensities on option prices and their corresponding implied volatilities, using numerical solution techniques. A discussion of some event-driven hedging strategies is given.
Download or read book Applications of State Space Models in Finance written by Sascha Mergner and published by Universitätsverlag Göttingen. This book was released on 2009 with total page 235 pages. Available in PDF, EPUB and Kindle. Book excerpt: State space models play a key role in the estimation of time-varying sensitivities in financial markets. The objective of this book is to analyze the relative merits of modern time series techniques, such as Markov regime switching and the Kalman filter, to model structural changes in the context of widely used concepts in finance. The presented material will be useful for financial economists and practitioners who are interested in taking time-variation in the relationship between financial assets and key economic factors explicitly into account. The empirical part illustrates the application of the various methods under consideration. As a distinctive feature, it includes a comprehensive analysis of the ability of time-varying coefficient models to estimate and predict the conditional nature of systematic risks for European industry portfolios.
Download or read book Regime switching and the Estimation of Multifractal Processes written by Laurent E. Calvet and published by . This book was released on 2003 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a discrete-time stochastic volatility model in which regime switching serves three purposes. First, changes in regimes capture low frequency variations, which is their traditional role. Second, they specify intermediate frequency dynamics that are usually assigned to smooth autoregressive processes. Finally, high frequency switches generate substantial outliers. Thus, a single mechanism captures three important features of the data that are typically addressed as distinct phenomena in the literature. Maximum likelihood estimation is developed and shown to perform well in finite sample. We estimate on exchange rate data a version of the process with four parameters and more than a thousand states. The estimated model compares favorably to earlier specifications both in- and out-of-sample. Multifractal forecasts slightly improve on GARCH(1,1) at daily and weekly intervals, and provide considerable gains in accuracy at horizons of 10 to 50 days.
Download or read book Stochastic Volatility and Jumps written by Katja Ignatieva and published by . This book was released on 2009 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes exponentially affine and non-affine stochastic volatility models with jumps in returns and volatility. Markov Chain Monte Carlo (MCMC) technique is applied within a Bayesian inference to estimate model parameters and latent variables using daily returns from the Samp;P 500 stock index. There are two approaches to overcome the problem of misspecification of the square root stochastic volatility model. The first approach proposed by Christo ersen, Jacobs and Mimouni (2008) suggests to investigate some non-affine alternatives of the volatility process. The second approach consists in examining more heavily parametrized models by adding jumps to the return and possibly to the volatility process. The aim of this paper is to combine both model frameworks and to test whether the class of affine models is outperformed by the class of non-affine models if we include jumps into the stochastic processes. We conclude that the non-affine model structure have promising statistical properties and are worth further investigations. Further, we find affine models with jump components that perform similar to the non affine models without jump components. Since non affine models yield economically unrealistic parameter estimates, and research is rather developed for the affine model structures we have a tendency to prefer the affine jump diffusion models.
Download or read book Applied Quantitative Finance written by Wolfgang Karl Härdle and published by Springer. This book was released on 2017-08-02 with total page 369 pages. Available in PDF, EPUB and Kindle. Book excerpt: This volume provides practical solutions and introduces recent theoretical developments in risk management, pricing of credit derivatives, quantification of volatility and copula modeling. This third edition is devoted to modern risk analysis based on quantitative methods and textual analytics to meet the current challenges in banking and finance. It includes 14 new contributions and presents a comprehensive, state-of-the-art treatment of cutting-edge methods and topics, such as collateralized debt obligations, the high-frequency analysis of market liquidity, and realized volatility. The book is divided into three parts: Part 1 revisits important market risk issues, while Part 2 introduces novel concepts in credit risk and its management along with updated quantitative methods. The third part discusses the dynamics of risk management and includes risk analysis of energy markets and for cryptocurrencies. Digital assets, such as blockchain-based currencies, have become popular b ut are theoretically challenging when based on conventional methods. Among others, it introduces a modern text-mining method called dynamic topic modeling in detail and applies it to the message board of Bitcoins. The unique synthesis of theory and practice supported by computational tools is reflected not only in the selection of topics, but also in the fine balance of scientific contributions on practical implementation and theoretical concepts. This link between theory and practice offers theoreticians insights into considerations of applicability and, vice versa, provides practitioners convenient access to new techniques in quantitative finance. Hence the book will appeal both to researchers, including master and PhD students, and practitioners, such as financial engineers. The results presented in the book are fully reproducible and all quantlets needed for calculations are provided on an accompanying website. The Quantlet platform quantlet.de, quantlet.com, quantlet.org is an integrated QuantNet environment consisting of different types of statistics-related documents and program codes. Its goal is to promote reproducibility and offer a platform for sharing validated knowledge native to the social web. QuantNet and the corresponding Data-Driven Documents-based visualization allows readers to reproduce the tables, pictures and calculations inside this Springer book.
Download or read book Missing Data Methods written by David M. Drukker and published by Emerald Group Publishing. This book was released on 2011-11-30 with total page 262 pages. Available in PDF, EPUB and Kindle. Book excerpt: Part of the "Advances in Econometrics" series, this title contains chapters covering topics such as: Missing-Data Imputation in Nonstationary Panel Data Models; Markov Switching Models in Empirical Finance; Bayesian Analysis of Multivariate Sample Selection Models Using Gaussian Copulas; and, Consistent Estimation and Orthogonality.
Download or read book Multifractal Volatility written by Laurent E. Calvet and published by Academic Press. This book was released on 2008-10-13 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: Calvet and Fisher present a powerful, new technique for volatility forecasting that draws on insights from the use of multifractals in the natural sciences and mathematics and provides a unified treatment of the use of multifractal techniques in finance. A large existing literature (e.g., Engle, 1982; Rossi, 1995) models volatility as an average of past shocks, possibly with a noise component. This approach often has difficulty capturing sharp discontinuities and large changes in financial volatility. Their research has shown the advantages of modelling volatility as subject to abrupt regime changes of heterogeneous durations. Using the intuition that some economic phenomena are long-lasting while others are more transient, they permit regimes to have varying degrees of persistence. By drawing on insights from the use of multifractals in the natural sciences and mathematics, they show how to construct high-dimensional regime-switching models that are easy to estimate, and substantially outperform some of the best traditional forecasting models such as GARCH. The goal of Multifractal Volatility is to popularize the approach by presenting these exciting new developments to a wider audience. They emphasize both theoretical and empirical applications, beginning with a style that is easily accessible and intuitive in early chapters, and extending to the most rigorous continuous-time and equilibrium pricing formulations in final chapters. - Presents a powerful new technique for forecasting volatility - Leads the reader intuitively from existing volatility techniques to the frontier of research in this field by top scholars at major universities - The first comprehensive book on multifractal techniques in finance, a cutting-edge field of research
