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 Volatility written by Robert A. Schwartz and published by Springer Science & Business Media. This book was released on 2010-11-18 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volatility is very much with us in today's equity markets. Day-to-day price swings are often large and intra-day volatility elevated, especially at market openings and closings. What explains this? What does this say about the quality of our markets? Can short-period volatility be controlled by better market design and a more effective use of electronic technology? Featuring insights from an international array of prominent academics, financial markets experts, policymakers and journalists, the book addresses these and other questions concerning this timely topic. In so doing, we seek deeper knowledge of the dynamic process of price formation, and of the market structure and regulatory environment within which our markets function. The Zicklin School of Business Financial Markets Series presents the insights emerging from a sequence of conferences hosted by the Zicklin School at Baruch College for industry professionals, regulators, and scholars. Much more than historical documents, the transcripts from the conferences are edited for clarity, perspective and context; material and comments from subsequent interviews with the panelists and speakers are integrated for a complete thematic presentation. Each book is focused on a well delineated topic, but all deliver broader insights into the quality and efficiency of the U.S. equity markets and the dynamic forces changing them.
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 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 Uncertainty Shocks and Equity Return Jumps and Volatility During the Great Depression written by Gabriel P. Mathy and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Resolution of Policy Uncertainty and Sudden Declines in Volatility written by Dante Amengual and published by . This book was released on 2017 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: We introduce downward volatility jumps into a general non-affine modeling framework of the term structure of variance. With variance swaps and S&P 500 returns, we find that downward volatility jumps are associated with a resolution of policy uncertainty, mostly through statements from FOMC meetings and speeches of the Federal Reserve's chairman. Ignoring such jumps may lead to an incorrect interpretation of the tail events, and hence biased estimates of variance risk premia. On the modeling side, we explore the structural differences and relative goodness-of-fits of factor specifications. We find that log-volatility models with at least one Ornstein-Uhlenbeck factor and double-sided jumps are superior in capturing volatility dynamics and pricing variance swaps, compared to the affine model prevalent in the literature or non-affine specifications without downward jumps.
Download or read book Time Varying Uncertainty and Jump Intensities written by Alexander Kraftschik and published by . This book was released on 2017 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: A major assumption of many financial models is that return jump intensities are proportional in the stochastic uncertainty of the underlying. Transferring this intuition to volatility jumps requires that in affine models the variance jump intensity is associated with changes in the stochastic variance-of-variance (q), not with changes in the local variance (V). A model-free analysis shows that the local variance-of-variance describes risk-neutral variance jump expectations well across different maturities, whereas the local variance has almost no explanatory power. The analysis suggests further that q relates to short-term jump expectations on stock return level. The two competing hypotheses of V- and q-associated variance jumps are included separately and jointly in VIX option pricing models. The results show that a single upward variance jump specification with an intensity that is affine in q leads to the best pricing results. This alternative modeling of the jump intensity has two implications for the variance dynamics. First, the local variance is estimated to be much higher in times of crises, whereas its long-run stochastic mean remains at lower levels. Second, the vol-of-vol risk-premium increases to 6-7%, which is else close to zero.
Download or read book Volatility Uncertainty and the Cross Section of Option Returns written by Jie Cao and published by . This book was released on 2019 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the relation between the uncertainty of volatility, measured as the volatility of volatility, and future delta-hedged equity option returns. We find that delta-hedged option returns consistently decrease in uncertainty of volatility. Our results hold for different measures of volatility such as implied volatility, EGARCH volatility from daily returns, and realized volatility from high-frequency data. The results are robust to firm characteristics, stock and option liquidity, volatility characteristics, and jump risks, and are not explained by common risk factors. Our findings suggest that option dealers charge a higher premium for single-name options with high uncertainty of volatility, because these stock options are more difficult to hedge.
Download or read book Volatility Jumps and Macroeconomic News Announcements written by Kam Fong Chan and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: While prior literature documents a link between macroeconomic news and price jumps, this paper demonstrates two channels through which economic announcements also manifest in volatility jumps. First, there is a strong coincidence of volatility jumps with scheduled announcements. Second, the mean jump size is an asymmetric function of the news surprise, with bad news resulting in larger jumps than good news. Furthermore, realized volatility (RV) and option-implied volatility (IV) behave very differently over the days surrounding announcements. RV increases sharply on announcement days, while IV tends to decline consistent with the resolution of heightened uncertainty embedded in option prices.
Download or read book Volatility Uncertainty Time Decay and Option Bid Ask Spreads in an Incomplete Market written by PeiLin Billy Hsieh and published by . This book was released on 2017 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper documents the fact that in options markets, the (percentage) implied volatility bid-ask spread increases at an increasing rate as the option's maturity date approaches. To explain this stylized fact, this paper provides a market microstructure model for the bid-ask spread in options markets. We first construct a static equilibrium model to illustrate the aforementioned phenomenon where risk averse and competitive option market makers quote bid and ask prices to minimize their inventory risk in an incomplete market with both directional and volatility risk. We extend this model to multi-periods and show that the same phenomenon occurs there as well. Two new implications are generated: a volatility level effect and a volatility variance effect. These implications are empirically tested, and the empirical results confirm the model's validity. Finally, we document the importance of de-trending the maturity effect by showing that the de-trended percentage volatility spread explains future jump intensities better than the original percentage volatility spread.
Download or read book Stock Market Jumps and Uncertainty Shocks During the Great Depression written by Gabriel Mathy and published by . This book was released on 2014 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: Stock market volatility was extremely high during the Great Depression relative to any other period in American history. At the same time, large negative and positive discontinuous jumps in stock returns can be detected using the Barndorff-Nielsen and Shephard (2004) test for jumps in financial time-series. These jumps coincided with periods when stock volatility was high as the arrival of new information about the uncertain future drove both the record stock volatility and the record jumps in stock returns. A timeline of the Depression is outlined, with important events that drove uncertainty highlighted such as the collapse of the banking system, policy changes, the breakdown of the gold standard, monetary policy uncertainty, and war jitters.
Download or read book The Intra day Impact of Communication on Euro dollar Volatility and Jumps written by and published by . This book was released on 2013 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Uncertainty and Monetary Policy in Good and Bad Times written by Giovanni Caggiano 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 Financial Markets with Volatility Uncertainty written by Jörg Vorbrink and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Jumps in the Volatility of Financial Markets written by Benoît Perron and published by Montréal : Université de Montréal, Dép. de sciences économiques. This book was released on 1999 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Volatility Jumps and Their Economic Determinants written by Massimiliano Caporin and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Forecasting in the Presence of Structural Breaks and Model Uncertainty written by David E. Rapach and published by Emerald Group Publishing. This book was released on 2008-02-29 with total page 691 pages. Available in PDF, EPUB and Kindle. Book excerpt: Forecasting in the presence of structural breaks and model uncertainty are active areas of research with implications for practical problems in forecasting. This book addresses forecasting variables from both Macroeconomics and Finance, and considers various methods of dealing with model instability and model uncertainty when forming forecasts.
