Abstract

http://ssrn.com/abstract=1943093
 
 

References (23)



 


 



Volatility Activity: Specification and Estimation


Viktor Todorov


Northwestern University

George Tauchen


Duke University - Economics Group

Iaryna Grynkiv


Duke University

May 13, 2011

Economic Research Initiatives at Duke (ERID) Working Paper No. 114

Abstract:     
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 to estimate and evaluate, 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 infinite variation pure-jump martingale with symmetric jump distribution. The latter provides a parsimonious generalization of the jump-diffusions commonly used for volatility modeling.

Number of Pages in PDF File: 32

Keywords: Asymmetric Volatility Activity, High-Frequency Data, Laplace Transform, Signed Power Variation, Specification Testing, Stochastic Volatility, Volatility Jumps

JEL Classification: C51, C52, G12

Accepted Paper Series


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Date posted: October 13, 2011  

Suggested Citation

Todorov, Viktor and Tauchen, George and Grynkiv, Iaryna, Volatility Activity: Specification and Estimation (May 13, 2011). Economic Research Initiatives at Duke (ERID) Working Paper No. 114. Available at SSRN: http://ssrn.com/abstract=1943093

Contact Information

Viktor Todorov
Northwestern University ( email )
2001 Sheridan Road
Evanston, IL 60208
United States
George E. Tauchen (Contact Author)
Duke University - Economics Group ( email )
Box 90097
221 Social Sciences
Durham, NC 27708-0097
United States
919-660-1812 (Phone)
919-684-8974 (Fax)
Iaryna Grynkiv
Duke University ( email )
100 Fuqua Drive
Durham, NC 27708-0204
United States
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