Cross-market volatility index with Factor-DCC
Sofiane Aboura () and
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This paper proposes a new empirical methodology for computing a cross-market volatility index – coined CMIX – based on the Factor DCC-model, implemented on volatility surprises. This approach solves both problems of treating high-dimensional data and estimating time-varying conditional correlations. We provide an application to a multi-asset market data composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. This new methodology may be attractive to asset managers, since it provides a simple way to hedge multi-asset portfolios with derivative contracts written on the CMIX.
Keywords: Asset management; Cross-market index; Factor-DCC; Volatility surprise (search for similar items in EconPapers)
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Published in International Review of Financial Analysis, Elsevier, 2015, 42 (132–140), 〈10.1016/j.irfa.2014.06.003〉
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Journal Article: Cross-market volatility index with Factor-DCC (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-01348723
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