A correlated stochastic volatility model measuring leverage and other stylized facts
Condensed Matter
2007-05-23 v1 Physics and Society
Abstract
We present a stochastic volatility market model where volatility is correlated with return and is represented by an Ornstein-Uhlenbeck process. With this model we exactly measure the leverage effect and other stylized facts, such as mean reversion, leptokurtosis and negative skewness. We also obtain a close analytical expression for the characteristic function and study the heavy tails of the probability distribution.
Keywords
Cite
@article{arxiv.cond-mat/0111334,
title = {A correlated stochastic volatility model measuring leverage and other stylized facts},
author = {Josep Perello and Jaume Masoliver},
journal= {arXiv preprint arXiv:cond-mat/0111334},
year = {2007}
}
Comments
22 pages, 2 figures and 2 tables