The Asian financial crisis: the start of a regime switch in volatility

Pierre Giot

No 2003078, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: Using a Markov switching model applied to the VIX and VDAX implied volatility indexes, we find that the volatility of the U.S. S&P100 index and German DAX index switched from a low-value state to a high-value state around the events of the Asian financial crisis. Moreover, the U.S. and German markets have stayed in the highvolatility state for the next five years. We also show that there has been a structural change in the stock index volatility vs returns relationship.

Keywords: implied volatility; financial crisis; Markov switching model; stock market (search for similar items in EconPapers)
Date: 2003-11
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Citations: View citations in EconPapers (4)

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