Journal article
How Crashes Develop: Intradaily Volatility and Crash Evolution
The Journal of finance (New York), Vol.74(1), pp.193-238
02/01/2019
DOI: 10.1111/jofi.12732
Abstract
This paper explores whether affine models with volatility jumps estimated on intradaily S&P 500 futures data over 1983 to 2008 can capture major daily outliers such as the 1987 stock market crash. Intradaily jumps in futures prices are typically small; self-exciting but short-lived volatility spikes capture intradaily and daily returns better. Multifactor models of the evolution of diffusive variance and jump intensities improve fits substantially, including out-of-sample over 2009 to 2016. The models capture reasonably well the conditional distributions of daily returns and realized variance outliers, but underpredict realized variance inliers. I also examine option pricing implications.
Details
- Title: Subtitle
- How Crashes Develop: Intradaily Volatility and Crash Evolution
- Creators
- David S. Bates - University of Iowa
- Resource Type
- Journal article
- Publication Details
- The Journal of finance (New York), Vol.74(1), pp.193-238
- DOI
- 10.1111/jofi.12732
- ISSN
- 0022-1082
- eISSN
- 1540-6261
- Publisher
- Wiley
- Number of pages
- 46
- Language
- English
- Date published
- 02/01/2019
- Academic Unit
- Finance
- Record Identifier
- 9984380478802771
Metrics
24 Record Views