Abstract : The economic consequences of a
long memory assumption about volatility are documented, by comparing implied
volatilities for option prices obtained from short and long memory volatility
processes. Numerical results are given for options on the S & P 100 index from 1984 to 1998, with lives up to two years. The
long memory assumption is found to have a significant impact upon the term
structure of implied volatilities and a relatively minor impact upon smile
effects. These conclusions are important because evidence for long memory in
volatility has been found in the prices of many assets.
Presented at the London School of Economics, Aarhus
University, Lancaster University and the Norwegian School of Economics and
Business Administration, Bergen. Presented at
the EFMA conference in Lugano, the EFA conference in Barcelona and the Inquire Europe
conference in Berlin.
Stephen Taylor, 2008
An econometric defence of pure-jump price dynamics
First draft December 2008. PDF file.
Abstract:
Pure-jump stochastic processes are shown to be capable of explaining many
empirical features of high-frequency asset prices. A simple pure-jump process
can match the empirical bipower, realized variance
and jump detection statistics of Andersen, Bollerslev
and Dobrev (2007) at the two-minute frequency. A
multi-frequency analysis of Spyder returns shows the
theoretical predictions can also be aligned reasonably accurately with the
empirical evidence across more than one sampling frequency.
Presented at
Beijing University, Lancaster University and at an Alesund
workshop and a Humboldt-Copenhagen conference, both on Financial Econometrics.
Stephen Taylor, Rafal
Wojakowski and Gang Xu, 2009
Information flow, volatility measurement
and jump prediction
First draft February 2009.
Abstract:
This paper empirically tests whether volatility contains information in
predicting jumps by using different volatility measurements, including squared
daily return, Black-Scholes at-the-money implied volatility,
model free implied volatility and realized volatility, etc etc
Dudley Gilder, Stephen Taylor
and Mark Shackleton, 2012
Cojumps in stock prices: empirical evidence
First draft April 2012. PDF file.
Abstract: We
examine contemporaneous jumps (cojumps) among
individual stocks and a proxy for the market portfolio. We examine two
hypotheses. The
first posits that a large number of stocks should be involved in (systematic) cojumps with the market portfolio (Hypothesis 1). The
second posits that systematic cojumps should be
associated with macroeconomic news announcements (Hypothesis 2). Evidence from
a variety of daily and intraday cojump detection
methods shows that although a small number of stocks are often detected to be
involved in systematic cojumps, there is a tendency
for a relatively large number of stocks to be involved in cojumps
with the market portfolio, supporting Hypothesis 1. We find only partial
support for Hypothesis 2. There is evidence of an association between
systematic cojumps and Federal Funds Target Rate
announcements.
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Last updated on 26 April 2012