Volatility Modelling with Heterogeneous Impulse Response Function: Introducing Non-Parametric Jumps into the Fiegarch Model

HAR volatility modelling with heterogeneous leverage and jumps

We propose a dynamic model for financial market volatility with an heterogeneous structure for three components: continuous volatiilty, leverage and jumps. We find that each of the three components plays a significant role in volatility forecasting and neglecting one of them is detrimental to the forecasting performance. Importantly, we find remarkable forecasting power for the negative past re...

Non–parametric volatility estimation

Short-term asymptotics for the implied volatility skew under a stochastic volatility model with Lévy jumps

The implied volatility skew has received relatively little attention in the literature on short-term asymptotics for financial models with jumps, despite its importance in model selection and calibration. We rectify this by providing high-order asymptotic expansions for the at-the-money implied volatility skew, under a rich class of stochastic volatility models with independent stable-like jump...

Short-time asymptotics for the implied volatility skew under a stochastic volatility model with Lévy jumps

The implied volatility slope has received relatively little attention in the literature on short-time asymptotics for financial models with jumps, despite its importance in model selection and calibration. In this paper, we fill this gap by providing high-order asymptotic expansions for the at-the-money implied volatility slope of a rich class of stochastic volatility models with independent st...

Which Impulse Response Function?

This paper compares standard and local projection techniques in the production of impulse response functions both theoretically and empirically. Through careful selection of a structural decomposition, the comparison continues to an application of US data to the textbook ISLM model. It is argued that local projection techniques offer a remedy to the bias of the conventional method especially at...