Multifrequency-based non-linear approach to analyzing implied volatility transmission across global financial markets

IF 7.6 1区 经济学 Q1 ECONOMICS
E. Boateng, Emmanuel Asafo-Adjei, J. Gatsi, Ș. C. Gherghina, L. Simionescu
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引用次数: 5

Abstract

Research background: The contagious impact of the COVID-19 pandemic has heightened financial market's volatility, nonlinearity, asymmetric and nonstationary dynamics. Hence, the existing relationship among financial assets may have been altered. Moreover, the level of investor risk aversion and market opportunities could also alter in the pandemic. Predictably, investors in the heat of the moment are concerned about minimizing losses. In order to determine the level of hedge risks between implied volatilities in the COVID-19 pandemic through information flow, it is required to take into account the increased vagueness of economic projections as well as the increased uncertainty in asset values as a result of the pandemic. Purpose of the article: The study aims to examine the transmission of information between the VIX-implied volatility index for S&P 500 and fifteen other implied volatility indices in the COVID-19 pandemic. Methods: We relied on daily changes in the VIX and fifteen other implied volatility indices from commodities, currencies, and stocks. The study employed the improved complete ensemble empirical mode decomposition with adaptive noise which is in line with the heterogeneous expectations of market participants to denoise the data and extract intrinsic mode functions (IMFs). Subsequently, we clustered the IMFs based on common features into high, low, and medium frequencies. The analysis was carried out using Rényi transfer entropy (RTE), which allowed for the evaluation of both linear and non-linear, as well as varied distributions of the market dynamics. Findings & value added: Findings from the RTE revealed a bi-directional flow of negative information amid the VIX and each of the volatility indices, particularly in the long term. We found this behavior of the markets to be consistent at varying levels of investors' risk aversion. The findings help investors with their portfolio strategies in the time of the pandemic, which has resulted in fluctuating levels of risk aversion. Our findings characterize global financial markets to be ?non-linear heterogeneous evolutionary systems?. The results also lend support to the emerging delayed volatility of market competitiveness and external shocks hypothesis.
基于多频率的非线性方法分析全球金融市场隐含波动率的传递
研究背景:新冠肺炎疫情的传染性影响加剧了金融市场的波动性、非线性、非对称性和非平稳性。因此,金融资产之间现有的关系可能已经改变。此外,投资者的风险规避水平和市场机会也可能在疫情中发生变化。不出所料,处于最热时刻的投资者关心的是将损失降至最低。为了通过信息流确定新冠肺炎疫情隐含波动之间的对冲风险水平,需要考虑到经济预测的模糊性增加以及疫情导致的资产价值的不确定性增加。文章目的:本研究旨在研究新冠肺炎大流行中标准普尔500指数的波动率波动率指数与其他15个隐含波动率指数之间的信息传递。方法:我们依赖于商品、货币和股票的波动率指数和其他15个隐含波动率指数的每日变化。该研究采用了具有自适应噪声的改进的完全集成经验模式分解,符合市场参与者对数据去噪和提取固有模式函数的异质期望。随后,我们根据共同特征将IMF分为高频、低频和中频。该分析使用Rényi传递熵(RTE)进行,该熵允许评估线性和非线性以及市场动态的不同分布。调查结果和附加值:RTE的调查结果显示,波动率指数和每种波动率指数之间存在双向负面信息流动,尤其是在长期内。我们发现,在不同程度的投资者避险情绪下,市场的这种行为是一致的。这些发现有助于投资者在疫情期间制定投资组合策略,疫情导致风险规避水平波动。我们的研究结果表明,全球金融市场是什么样的?非线性异质进化系统?。研究结果也支持了新兴的市场竞争力延迟波动和外部冲击假说。
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来源期刊
CiteScore
13.70
自引率
5.90%
发文量
26
审稿时长
24 weeks
期刊介绍: The Oeconomia Copernicana is an academic quarterly journal aimed at academicians, economic policymakers, and students studying finance, accounting, management, and economics. It publishes academic articles on contemporary issues in economics, finance, banking, accounting, and management from various research perspectives. The journal's mission is to publish advanced theoretical and empirical research that contributes to the development of these disciplines and has practical relevance. The journal encourages the use of various research methods, including falsification of conventional understanding, theory building through inductive or qualitative research, first empirical testing of theories, meta-analysis with theoretical implications, constructive replication, and a combination of qualitative, quantitative, field, laboratory, and meta-analytic approaches. While the journal prioritizes comprehensive manuscripts that include methodological-based theoretical and empirical research with implications for policymaking, it also welcomes submissions focused solely on theory or methodology.
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