The role of stochastic volatility and return jumps: reproducing volatility and higher moments in the KOSPI 200 returns dynamics |
| |
| Authors: | In Joon Kim In-Seok Baek Jaesun Noh Sol Kim |
| |
| Institution: | 1.School of Business,Yonsei University,Seodaemun-gu,Republic of Korea;2.Samsung Investment Trust Management Co., Ltd,Youngdeungpo-gu,Republic of Korea;3.Graduate School of Management,Korea Advanced Institute of Science and Technology,Dongdaemoon-gu,Republic of Korea;4.School of Management,Seoul Woman’s University,Nowon-gu,Republic of Korea |
| |
| Abstract: | This paper investigates the role of stochastic volatility and return jumps in reproducing the volatility dynamics and the
shape characteristics of the Korean Composite Stock Price Index (KOSPI) 200 returns distribution. Using efficient method of
moments and reprojection analysis, we find that stochastic volatility models, both with and without return jumps, capture
return dynamics surprisingly well. The stochastic volatility model without return jumps, however, cannot fully reproduce the
conditional kurtosis implied by the data. Return jumps successfully complement this gap. We also find that return jumps are
essential in capturing the volatility smirk effects observed in short-term options.
|
| |
| Keywords: | Stochastic volatility model Jump diffusion model Efficient method of moments Reprojection Markov Chain Monte Carlo Option pricing implications |
| 本文献已被 SpringerLink 等数据库收录！ |
|
