Resolution of policy uncertainty and sudden declines in volatility

Inferring volatility dynamics and risk premia from the S&P 500 and VIX markets

“…While it is standard to model positive jumps in the volatility, accounting for negative jumps has been less investigated. Amengual and Xiu (2015) show that negative jumps in volatility do occur and are usually triggered by macroeconomic announcements. We assume that the jump intensities depend linearly on levels of the diffusive latent processes v, m, and u.…”

“…Our model is novel and able to capture important stylized facts of S&P 500 returns, which have been recently highlighted in the literature. In particular, it includes a state-of-the-art representation of the jumps, inspired from Andersen, Fusari, and Todorov (2015) and Amengual and Xiu (2015), which makes it possible to better capture the stochastic skewness of returns and of their variance. Despite its flexibility, it is parsimonious and 3 See, e.g., Lindström, Ströjby, Brodén, Wiktorsson, and Holst (2008).…”

Cross-Category, Trans-Pacific Spillovers of Policy Uncertainty and Financial Market Volatility

“…The majority of studies is concerned with EPU's (unidirectional) impact on equity markets (e.g. Pastor and Veronesi 2013, Brogaard and Detzel 2015, Amengual and Xiu 2018, but there are also a few exceptions. Most notably, Beckmann and Czudaj (2017) examine the impact of US EPU, MPU and FPU on exchange rate expectations and forecast errors for various currencies, while investigate spillovers between stock volatility, FX volatility and aggregate EPU in the context of Brexit.…”

A multifactor transformed diffusion model with applications to VIX and VIX futures

“…derivative pricing, copula modelling) are often tractable too (c.f. Bu et al 2011, Eraker and Wang 2015, Bu, Jawadi and Li 2017, Amengual and Xiu 2018. In contrast, …nancial modelling with general nonlinear di¤usions can be signi…cantly more di¢ cult.…”