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Kaeck, Andreas and Alexander, Carol (2012) Volatility dynamics for the S&P 500: further evidence from non-affine, multi-factor jump diffusions. Journal of Banking & Finance, 36 (11). pp. 3110-3121. ISSN 0378-4266
Full text not available from this repository.Abstract
We apply Markov chain Monte Carlo methods to time series data on S&P 500 index returns, and to its option prices via a term structure of VIX indices, to estimate 18 different affine and non-affine stochastic volatility models with one or two variance factors, and where jumps are allowed in both the price and the instantaneous volatility. The in-sample fit to the VIX term structure shows that the second (stochastic long-term volatility) factor is required to fit the VIX term structure. Out-of-sample tests on the fit to individual option prices, as well as in-sample tests, show that the inclusion of jumps is less important than allowing for non-affine dynamics. The estimation and testing periods together cover more than 21 years of daily data.
| Item Type: | Article |
|---|---|
| Keywords: | Gibbs sampler; Instantaneous volatility dynamics; MCMC; Particle filter; S&P 500 options; VIX |
| Schools and Departments: | School of Business, Management and Economics > Business and Management |
| Subjects: | H Social Sciences > HG Finance |
| Related URLs: | |
| Depositing User: | Carol Alexander |
| Date Deposited: | 11 Sep 2012 08:52 |
| Last Modified: | 09 Sep 2013 15:57 |
| URI: | http://srodev.sussex.ac.uk/id/eprint/40638 |