Stochastic volatility and leverage effect

Josep Perelló () and Jaume Masoliver

Papers from arXiv.org

Abstract: We prove that a wide class of correlated stochastic volatility models exactly measure an empirical fact in which past returns are anticorrelated with future volatilities: the so-called ``leverage effect''. This quantitative measure allows us to fully estimate all parameters involved and it will entail a deeper study on correlated stochastic volatility models with practical applications on option pricing and risk management.

Date: 2002-02
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Published in Physical Review E 67, 037102 (2003)

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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:cond-mat/0202203

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