The role of stochastic volatility and return jumps: reproducing volatility and higher moments in the KOSPI 200 returns dynamics

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.

Volatility linkages of the equity,bond and money markets: an implied volatility approach

This study proposes an alternative approach for examining volatility linkages between Standard & Poor's 500, Eurodollar futures and 30 year Treasury Bond futures markets using implied volatility from the three markets. Simple correlation analysis between implied volatilities in the three markets is used to assess market correlations. Spurious correlation effects are considered and controlled for. I find that correlations between implied volatilities in the equity, money and bond markets are positive, strong and robust. Furthermore, I replicate the approach of Fleming, Kirby and Ostdiek (1998) to check the substitutability of the implied volatility approach and find that the results are nearly identical; I conclude that my approach is simple, robust and preferable in practice. I also argue that the results from this paper provide supportive evidence on the information content of implied volatilities in the equity, bond and money markets.     

Impact of the Covid-19 induced panic on the Environmental,Social and Governance leaders equity volatility: A time-frequency analysis

We apply wavelet analyses to study how the Covid-19 fueled panic influenced the volatility of ESG (environmental, social and governance) leaders’ indices encompassing the World, the USA, Europe, China, and the Emerging Markets. We document intervals of the low, medium, and high coherence between the Coronavirus Panic Index and the price moves of the ESG Leaders indices. The low coherence intervals signify the diversification potential of ESG investments during a systemic pandemic such as Covid-19. We document differences in the pattern exhibited by various geographical indices highlighting their potential role for designing cross-geography hedge strategies, both now and in the future.