Volatility activity: Specification and estimation

Published

Journal Article

The paper examines volatility activity and its asymmetry and undertakes further specification analysis of volatility models based on it. We develop new nonparametric statistics using high-frequency option-based VIX data to test for asymmetry in volatility jumps. We also develop methods for estimating and evaluating, using price data alone, a general encompassing model for volatility dynamics where volatility activity is unrestricted. The nonparametric application to VIX data, along with model estimation for S&P index returns, suggests that volatility moves are best captured by an infinite variation pure-jump martingale with a symmetric jump compensator around zero. The latter provides a parsimonious generalization of the jump-diffusions commonly used for volatility modeling.

Full Text

Duke Authors

Cited Authors

  • Todorov, V; Tauchen, G; Grynkiv, I

Published Date

  • January 1, 2014

Published In

Volume / Issue

  • 178 / PART 1

Start / End Page

  • 180 - 193

International Standard Serial Number (ISSN)

  • 0304-4076

Digital Object Identifier (DOI)

  • 10.1016/j.jeconom.2013.08.015

Citation Source

  • Scopus