A common jump factor stochastic volatility model

We introduce a new multivariate stochastic volatility model, based on the presence of a latent common factor with random jumps. The common factor is parameterized as a permanent component using a compound binomial process. This model can capture common jumps in the latent volatilities between markets, with particular relevance in the presence of crises and contagion in emerging markets.

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Year of publication:	2015
Authors:	Laurini, Márcio Poletti ; Mauad, Roberto Baltieri
Published in:	Finance Research Letters. - Elsevier, ISSN 1544-6123. - Vol. 12.2015, C, p. 2-10
Publisher:	Elsevier
Subject:	Stochastic volatility \| MCMC \| Jump process \| Regime changes

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Type of publication:	Article
Classification:	c58 ; C53 - Forecasting and Other Model Applications ; E43 - Determination of Interest Rates; Term Structure Interest Rates ; G17 - Financial Forecasting
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10011191199