Dissecting skewness under affine jump-diffusions

Fang Zhen and Zhang Jin E. ()
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Zhang Jin E.: Department of Accountancy and Finance, Otago Business School, University of Otago, Dunedin 9054, New Zealand

Studies in Nonlinear Dynamics & Econometrics, 2020, vol. 24, issue 4, 19

Abstract: This paper derives the theoretical skewness in a five-factor affine jump-diffusion model with stochastic variance and jump intensity, and jumps in prices and variances. Numerical analysis shows that all of the uncertainties in this model affect skewness. The information regarding jumps in prices is mainly reflected in the short-term skewness. The skewness for other maturities carries the information that is highly correlated with variance. Furthermore, the theoretical VIX and skewness under a simplified five-factor model are used to fit the market risk-neutral volatility and skewness sequentially. The fitting performances are better than traditional double-jump models.

Keywords: jump-diffusion; skewness; stochastic volatility (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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DOI: 10.1515/snde-2018-0086

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