A cross-volatility index for hedging the country risk
Sofiane Aboura and
Additional contact information
Sofiane Aboura: DRM - Dauphine Recherches en Management - Université Paris-Dauphine - CNRS - Centre National de la Recherche Scientifique
Post-Print from HAL
This paper proposes a new empirical methodology for computing a cross-volatility index, coined CVIX, that characterizes the country risk understood here as the financial market risk measurement. The approach, based on the Factor DCC-model, requires to encapsulate all the sources of risk stemming from the financial markets for any given country. We provide an application to the U.S. economy by constructing an aggregate volatility index composed of implied volatility indexes characterizing the equity market, the FX market, fixed income market and the commodity market. The analysis reveals that 75% of the aggregate risk comes from the commodity market, and that the volatility index average value evolves around 22%. The CVIX provides a better hedging performance than the VVIX used as a benchmark.
Keywords: Cross-Volatility Index; Country Risk; Factor-DCC; PCA; LASSO (search for similar items in EconPapers)
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01529742
References: Add references at CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Published in Journal of International Financial Markets, Institutions and Money, Elsevier, 2015, 38, pp.25-41. ⟨10.1016/j.intfin.2015.05.008⟩
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Journal Article: A cross-volatility index for hedging the country risk (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01529742
Access Statistics for this paper
More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().