University of St.Gallen
research platform alexandria
Publikationen durchsuchen
Publikationen filtern
nach Person
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
 
nach Jahr

A Dynamic Copula Approach to Recovering the Index Implied Volatility Skew

Matthias Fengler, H. Herwartz & Christian Werner

Volltext etc. Volltext nicht hinterlegt
Kurzfassung Equity index implied volatility functions are known to be excessively skewed in comparison with implied volatility at the single stock level. We study this stylized fact for the case of a major German stock index, the DAX, by recovering index implied volatility from simulating the 30-dimensional return system of all DAX constituents. Option prices are computed after risk neutralization of the multivariate process which is estimated under the physical probability measure. The multivariate models belong to the class of copula asymmetric dynamic conditional correlation models. We show that moderate tail dependence coupled with asymmetric correlation response to negative news is essential to explain the index implied volatility skew. Standard dynamic correlation models with zero tail dependence fail to generate a sufficiently steep implied volatility skew.
   
Typ Artikel (wissenschaftliche Zeitschrift)
   
Schlagwörter (Tags)
   
Sprache Englisch
Art des Artikels Journal Artikel
Erscheinungsdatum 3-2012
Zeitschrift Journal of Financial Econometrics
Verlag Oxford Journals (Oxford UK)
ISSN 1479-8409
ISSN (online) 1479-8417
DOI 10.1093/jjfinec/nbr016
Jahrgang bzw. Volume 10
Nummer bzw. Issue 3
Seite(n) 457-493
Review Double-Blind Review
   
Zitation Fengler, Matthias ; Herwartz, H. ; Werner, Christian: A Dynamic Copula Approach to Recovering the Index Implied Volatility Skew. In: Journal of Financial Econometrics 10 (2012), Nr. 3, S. 457-493, DOI:10.1093/jjfinec/nbr016.