The new approaches in econometric research of financial markets. Distributed volatility

V. I. Tinyakova ()
Additional contact information
V. I. Tinyakova: Chair of Information Technologies and Mathematical Methods in Economy, Voronezh State University (Voronezh, Russia)

Review of Applied Socio-Economic Research, 2012, vol. 4, issue 2, 247-255

Abstract: Volatility is one of the most important characteristics of any financial instrument return. The idea which states that all information about financial assets is contained in its price is implemented in current approaches to modeling the volatility of financial assets and it corresponds well with the efficient market hypothesis. Therefore, all volatility models use only the information contained in the price of the asset is being modeled. In this paper we propose an approach that implements the assumption that the volatility of an asset depends on the market volatility. But the relationship is not correlation-regression, though this may exist, but is probabilistic, in the sense that the probability of the high volatility of any asset increases with the volatility of the financial market. To implement this approach, a model which helps to evaluate the distributed volatility is offered. Distributed volatility, however, as VaR, helps to evaluate the positive and negative part of volatility, but unlike VaR, describes volatility dynamics. So it allows forecast calculation of the financial asset volatility, particularly in estimation of the intrinsic value of stock options.

Keywords: volatility; distributed volatility; forecast estimation of volatility; financial market; VaR; Black-Scholes formula; CRR-model; model ARCH (search for similar items in EconPapers)
JEL-codes: C51 C53 C58 G11 G17 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://reaser.eu/RePec/rse/wpaper/30_Tinyakova_Reaser4_p247-255.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rse:wpaper:v:4:y:2012:i:2:p:247-255

Access Statistics for this article

Review of Applied Socio-Economic Research is currently edited by Ruxandra Vasilescu

More articles in Review of Applied Socio-Economic Research from Pro Global Science Association Contact information at EDIRC.
Bibliographic data for series maintained by Manuela Epure ().