Economics at your fingertips  

Exploring Return Dynamics via Corridor Implied Volatility

Torben Andersen (), Oleg Bondarenko and Maria T. Gonzalez-Perez ()

Review of Financial Studies, 2015, vol. 28, issue 10, 2902-2945

Abstract: Some fundamental questions regarding equity-index return dynamics are difficult to address due to the latent character of spot volatility. We exploit tick-by-tick option quotes to compute a novel "Corridor Volatility" index which may serve as an observable proxy for short-term volatility. Exploiting this index, we find that equity-index volatility jumps are common, symmetrically distributed, and cojump with the underlying returns. Moreover, the return-volatility asymmetry is more pronounced than is generally recognized and is in force for both diffusive and jump innovations in volatility. Finally, the index performs admirably during turbulent market conditions, constituting a useful real-time gauge of market stress.

Date: 2015
References: Add references at CitEc
Citations: View citations in EconPapers (33) Track citations by RSS feed

Downloads: (external link) (application/pdf)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from

Access Statistics for this article

Review of Financial Studies is currently edited by Itay Goldstein

More articles in Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().

Page updated 2022-08-30
Handle: RePEc:oup:rfinst:v:28:y:2015:i:10:p:2902-2945.