Up and Down Volatilities and Their Dynamics

Palandri, Alessandro; Sandri, Matteo

doi:10.2139/ssrn.2078974

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2013

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“…Similar approaches are found in several literatures such as in Pelagatti (2009), the skewness in return dynamics are examined with two different dynamics in positive and negative returns. Palandri and Sandri (2012) investigates whether positive and negative returns share the same dynamic volatility process using a bivariate generalization of the standard EGARCH model.…”

Section: Introductionmentioning

confidence: 99%

Conditional correlation in asset return and GARCH intensity model

Choe

Lee

2013

AStA Adv Stat Anal

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In an asset return series there is a conditional asymmetric dependence between current return and past volatility depending on the current return's sign. To take into account the conditional asymmetry, we introduce new models for asset return dynamics in which frequencies of the up and down movements of asset price have conditionally independentPoisson distributions with stochastic intensities. The intensities are assumed to be stochastic recurrence equations of the GARCH type in order to capture the volatility clustering and the leverage effect. We provide an important linkage between our model and existing GARCH, explain how to apply maximum likelihood estimation to determine the parameters in the intensity model and show empirical results with the S&P 500 index return series.

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Section: Introductionmentioning

confidence: 99%