Volatility in Equilibrium : Asymmetries and Dynamic Dependencies *

@inproceedings{Bollerslev2011VolatilityIE,
  title={Volatility in Equilibrium : Asymmetries and Dynamic Dependencies *},
  author={Tim Bollerslev and Natalia Sizova and GEORGE TAUCHEN},
  year={2011}
}
Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective expectations of the volatility, features short memory. This paper develops the first internally consistent equilibrium-based explanation for all these empirical facts. Using newly available high-frequency intraday data for the S&P 500 and the VIX… CONTINUE READING
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