Volatility, diversification and contagion

Enrique Sentana

No 12824, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this paper I describe in detail the concepts of volatility, diversification and contagion, three basic keys to understand the seemingly whimsical behaviour of financial markets. The presentation is deliberately non-technical and largely self-contained, with most required concepts defined along the way. Nevertheless, the analysis is mostly empirically oriented, with an emphasis on the methods that have been proposed to measure those concepts and a discussion of the stylised facts that the resulting measures imply. I also use those measures to study the effects of the financial crisis of 2007-2008 and the euro sovereign debt crisis of 2010-2012 on Spain.

Keywords: Correlation; Dependence; Stock markets; Volatility derivatives (search for similar items in EconPapers)
JEL-codes: C58 G11 G32 (search for similar items in EconPapers)
Date: 2018-03
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Working Paper: Volatility, Diversification and Contagion (2018)
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