Download or read book The Impact of Jumps in Volatility and Returns written by Michael S. Johannes and published by . This book was released on 2011 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines a class of continuous-time models that incorporate jumps in returns and volatility, in addition to diffusive stochastic volatility. We develop a likelihood-based estimation strategy and provide estimates of model parameters, spot volatility, jump times and jump sizes using both Samp;P 500 and Nasdaq 100 index returns. Estimates of jumps times, jump sizes and volatility are particularly useful for disentangling the dynamic effects of these factors during periods of market stress, such as those in 1987, 1997 and 1998. Using both formal and informal diagnostics, we find strong evidence for jumps in volatility, even after accounting for jumps in returns. We use implied volatility curves computed from option prices to judge the economic differences between the models. Finally, we evaluate the impact of estimation risk on option prices and find that the uncertainty in estimating the parameters and the spot volatility has important, though very different, effects on option prices.

Download or read book Investigating Impacts of Self exciting Jumps in Returns and Volatility written by Andras Fulop and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book News Arrival Jump Dynamics and Volatility Components for Individual Stock Returns written by John M. Maheu and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper models different components of the return distribution which are assumed to be directed by a latent news process. The conditional variance of returns is a combination of jumps and smoothly changing components. This mixture captures occasional large changes in price, due to the impact of news innovations such as earnings surprises, as well as smoother changes in prices which can result from liquidity trading or strategic trading as information disseminates. Unlike typical SV-jump models, previous realizations of both jump and normal innovations can feedback asymmetrically into expected volatility. This is a new source of asymmetry (in addition to good versus bad news) that improves forecasts of volatility particularly after large moves such as the '87 crash. A heterogeneous Poisson process governs the likelihood of jumps and is summarized by a time-varying conditional intensity parameter. The model is applied to returns from individual companies and three indices. We provide empirical evidence of the impact and feedback effects of jump versus normal return innovations, contemporaneous and lagged leverage effects, the time-series dynamics of jump clustering, and the importance of modeling the dynamics of jumps around high volatility episodes.

Download or read book The Relationship Between the Volatility of Returns and the Number of Jumps in Financial Markets written by Álvaro Cartea and published by . This book was released on 2017 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a methodology to employ high frequency financial data to obtain estimates of volatility of log-prices which are not affected by microstructure noise and Lévy jumps. We introduce the 'number of jumps' as a variable to explain and predict volatility and show that the number of jumps in SPY prices is an important variable to explain the daily volatility of the SPY log-returns, has more explanatory power than other variables (e.g. high and low, open and close), and has a similar explanatory power to that of the VIX. Finally, number of jumps is very useful to forecast volatility and contains information that is not impounded in the VIX.

Download or read book Volatility Jumps and Predictability of Returns written by Silvano Bordignon and published by . This book was released on 2008 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Causality Effect of Returns Continuous Volatility and Jumps Evidence from the U S and European Index Futures Markets written by 廖志偉 and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays on Fine Structure of Asset Returns Jumps and Stochastic Volatility written by Jung-suk Yu and published by . This book was released on 2006 with total page 122 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Financial Market Volatility and Jumps written by Xin Huang and published by . This book was released on 2007 with total page 185 pages. Available in PDF, EPUB and Kindle. Book excerpt: JEL classification. C1, C2, C5, C51, C52, F3, F4, G1, G14.

Download or read book Price and Volatility Co Jumps written by Federico M. Bandi and published by . This book was released on 2014 with total page 75 pages. Available in PDF, EPUB and Kindle. Book excerpt: The dependence between the magnitudes of discontinuous changes in asset prices and contemporaneous discontinuous changes in volatility (co-jumps) is a fundamental aspect of the price process contributing, among other effects, to skewness in the return distribution. Yet, its nature has been reported by many as being - in terms of sign, magnitude, and statistical significance - largely elusive. Using a novel identification strategy for stochastic volatility modelling in continuous time relying on trade-level information for spot variance estimation, as well as infinitesimal cross-moments, this paper documents that a sizeable proportion of discontinuous changes in asset prices are associated with strongly anti-correlated, contemporaneous changes in volatility. Not only are the price jump sizes strongly negatively correlated with the volatility jump sizes, but the absolute values of their (negative) mean and dispersion appear to increase with the volatility level, an additional effect which should lead to care in the management of joint directional and volatility jump risk. Using a possibly non-monotonic pricing kernel, we illustrate the equilibrium impact of price and volatility co-jumps on both return and variance risk premia.

Download or read book The Impact of Jumps and Leverage in Forecasting Co volatility written by Manabu Asai and published by . This book was released on 2015 with total page 12 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Handbook of Volatility Models and Their Applications written by Luc Bauwens and published by John Wiley & Sons. This book was released on 2012-03-22 with total page 566 pages. Available in PDF, EPUB and Kindle. Book excerpt: A complete guide to the theory and practice of volatility models in financial engineering Volatility has become a hot topic in this era of instant communications, spawning a great deal of research in empirical finance and time series econometrics. Providing an overview of the most recent advances, Handbook of Volatility Models and Their Applications explores key concepts and topics essential for modeling the volatility of financial time series, both univariate and multivariate, parametric and non-parametric, high-frequency and low-frequency. Featuring contributions from international experts in the field, the book features numerous examples and applications from real-world projects and cutting-edge research, showing step by step how to use various methods accurately and efficiently when assessing volatility rates. Following a comprehensive introduction to the topic, readers are provided with three distinct sections that unify the statistical and practical aspects of volatility: Autoregressive Conditional Heteroskedasticity and Stochastic Volatility presents ARCH and stochastic volatility models, with a focus on recent research topics including mean, volatility, and skewness spillovers in equity markets Other Models and Methods presents alternative approaches, such as multiplicative error models, nonparametric and semi-parametric models, and copula-based models of (co)volatilities Realized Volatility explores issues of the measurement of volatility by realized variances and covariances, guiding readers on how to successfully model and forecast these measures Handbook of Volatility Models and Their Applications is an essential reference for academics and practitioners in finance, business, and econometrics who work with volatility models in their everyday work. The book also serves as a supplement for courses on risk management and volatility at the upper-undergraduate and graduate levels.

Download or read book The Importance of Jumps in Modelling Volatility During the 2008 Financial Crisis written by Jing Chen and published by . This book was released on 2017 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We combine recent developments on extracting jumps from high frequency stock index data with the literature on option pricing with time varying volatility to model S&P 500 index returns from 2005. We compare the fit of several GARCH models, with and without jumps, from the historical return series to models imputed from the index options market across a range of strike prices. Whilst we find strong evidence of jumps in the period after September 2008, it is evident that much of the variation often attributed to jumps should in all likelihood be ascribed to an increase in the volatility of the continuous diffusion.

Download or read book Stochastic Volatility Jumps and Variance Risk Premia written by Worapree Maneesoonthorn and published by . This book was released on 2013 with total page 604 pages. Available in PDF, EPUB and Kindle. Book excerpt: Planning for future movements in asset prices and understanding the variation in the return on assets are key to the successful management of investment portfolios. This thesis investigates issues related to modelling both asset return volatility and the large movements in asset prices that may be induced by the events in the general economy, as random processes, with the implications for risk compensation and the prediction thereof being a particular focus. Exploiting modern numerical Bayesian tools, a state space framework is used to conduct all inference, with the thesis making three novel contributions to the empirical finance literature. First, observable measures of physical and option-implied volatility on the S&P 500 market index are combined to conduct inference about the latent spot market volatility, with a dynamic structure specified for the variance risk premia factored into option prices. The pooling of dual sources of information, along with the use of a dynamic model for the risk premia, produces insights into the workings of the U.S. markets, plus yields accurate forecasts of several key variables, including over the recent period of stock market turmoil. Second, a new continuous time asset pricing model allowing for dynamics in, and interactions between, the occurrences of price and volatility jumps is proposed. Various hypotheses about the nature of extreme movements in both S&P 500 returns and the volatility of the index are analyzed, within a state space model in which the usual returns measure is supplemented by direct measures of physical volatility and price jumps. The empirical results emphasize the importance of modelling both types of jumps, with the link between the intensity of volatility jumps and certain key extreme events in the economy being drawn. Finally, an empirical exploration of an alternative framework for the statistical evaluation of price jumps is conducted, with the aim of comparing the resultant measures of return variance and jumps with those induced by more conventional methods. The empirical analysis sheds light on the potential impact of the method of measurement construction on inference about the asset pricing process, and ultimately any financial decisions based on such inference.

Download or read book The Impact of Jumps on Carry Trade Returns written by Suzanne S. Lee and published by . This book was released on 2017 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how jump risks are priced in currency markets. We find that currencies whose changes are more sensitive to negative market jumps provide significantly higher expected returns. The positive risk premium constitutes compensation for the extreme losses during periods of market turmoil. Using the empirical findings, we propose a jump modified carry trade strategy, which has approximately 2-percentage-point (per annum) higher returns than the regular carry trade strategy. These findings result from the fact that negative jump betas are significantly related to the riskiness of currencies and business conditions.

Download or read book Financial Modelling with Jump Processes written by Peter Tankov and published by CRC Press. This book was released on 2003-12-30 with total page 552 pages. Available in PDF, EPUB and Kindle. Book excerpt: WINNER of a Riskbook.com Best of 2004 Book Award! During the last decade, financial models based on jump processes have acquired increasing popularity in risk management and option pricing. Much has been published on the subject, but the technical nature of most papers makes them difficult for nonspecialists to understand, and the mathematic

Download or read book Volatility Uncertainty and Jumps written by Thomas Grünthaler and published by . This book was released on 2019 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the joint dynamics of S&P 500 jumps and volatility using option-implied information. Our results indicate that volatility is not related to the evolution of jumps but the uncertainty about volatility is. More uncertainty about future volatility shifts the return distribution to the left, such that negative price jumps are more likely and positive price jumps are less likely. We highlight the unique information content in volatility uncertainty and further show that it significantly predicts realized price jumps. Our results have strong implications for structural option pricing models as a linear link between the arrival of jumps and volatility is commonly assumed.

Download or read book Financial Macro and Micro Econometrics Using R written by and published by Elsevier. This book was released on 2020-01-25 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial, Macro and Micro Econometrics Using R, Volume 42, provides state-of-the-art information on important topics in econometrics, including multivariate GARCH, stochastic frontiers, fractional responses, specification testing and model selection, exogeneity testing, causal analysis and forecasting, GMM models, asset bubbles and crises, corporate investments, classification, forecasting, nonstandard problems, cointegration, financial market jumps and co-jumps, among other topics. Presents chapters authored by distinguished, honored researchers who have received awards from the Journal of Econometrics or the Econometric Society Includes descriptions and links to resources and free open source R Gives readers what they need to jumpstart their understanding on the state-of-the-art