Volatility Term Structure Modeling Using Nelson-Siegel Model

Barbora Malinska
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Barbora Malinska: Institute of Economic Studies, Faculty of Social Sciences, Charles University in Prague, Smetanovo nabrezi 6, 111 01 Prague 1, Czech Republic
Authors registered in the RePEc Author Service: Jozef Baruník

No 2018/17, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Understanding of volatility term structure is highly relevant both for market agents and policymakers. As traditional methodologies often bring results contradicting situation on the markets, we revisit volatility term structure modeling in univariate case. In this paper we benefi t from extensive high-frequency dataset of US Treasury futures prices allowing us to empirically inspect the behaviour of the respective realized volatility term structure. We believe that the discovered properties justify the application of multi-factor modeling techniques primarily developed for yield curves. Finally we develop the comprehensive methodology fitting empirical data efficiently by term structure decomposition using Nelson-Siegel class of models.

Keywords: Realized volatility; Term structure; Dynamic Nelson-Siegel model; High-frequency data (search for similar items in EconPapers)
Pages: 37pages
Date: 2018-08, Revised 2018-08
New Economics Papers: this item is included in nep-rmg
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