{"title":"Resolution of Policy Uncertainty and Sudden Declines in Volatility","authors":"Dante Amengual, D. Xiu","doi":"10.2139/ssrn.2348137","DOIUrl":"https://doi.org/10.2139/ssrn.2348137","url":null,"abstract":"We introduce downward volatility jumps into a general non-affine modeling framework of the term structure of variance. With variance swaps and S&P 500 returns, we find that downward volatility jumps are associated with a resolution of policy uncertainty, mostly through statements from FOMC meetings and speeches of the Federal Reserve’s chairman. Ignoring such jumps may lead to an incorrect interpretation of the tail events, and hence biased estimates of variance risk premia. On the modeling side, we explore the structural differences and relative goodness-of-fits of factor specifications. We find that log-volatility models with at least one Ornstein–Uhlenbeck factor and double-sided jumps are superior in capturing volatility dynamics and pricing variance swaps, compared to the affine model prevalent in the literature or non-affine specifications without downward jumps.","PeriodicalId":144511,"journal":{"name":"Chicago Booth Fama-Miller: Capital Markets (Topic)","volume":"283 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-08-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132567829","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"A Study on Commodity Market Behaviour, Price Discovery and Its Factors","authors":"S. T., Abhishek Dilipkumar Solanki, M. Dash","doi":"10.2139/ssrn.1988812","DOIUrl":"https://doi.org/10.2139/ssrn.1988812","url":null,"abstract":"Commodity markets have been gaining importance in recent years, giving participants an opportunity to go for forward contracting and hedging. In particular, derivative markets have attained more than eighteen times in trading volume when compared to the spot markets. This paper provides an overview of the commodity market in India and its participants, and analyses twelve commodities that are traded in MCX (Multi Commodity Exchange), in terms of price discovery of the spot and futures markets using GARCH model. It also analyses the impact of trading volume, inflation and other macroeconomic factors on spot and futures price movements.","PeriodicalId":144511,"journal":{"name":"Chicago Booth Fama-Miller: Capital Markets (Topic)","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2012-01-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125631769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Arbitrage and Equilibrium Foundations of the Duration Risk Measure","authors":"Sanjay K. Nawalkha","doi":"10.2139/ssrn.979056","DOIUrl":"https://doi.org/10.2139/ssrn.979056","url":null,"abstract":"This paper provides arbitrage and equilibrium foundations of the traditional duration risk measure (see Macaulay [1938] and Hicks [1939]), by relating it to the Heath, Jarrow and Morton (HJM) [1992] term structure theory and Merton's intertemporal CAPM [1973]. Under the new approach the duration model is shown to be consistent with a subset of arbitrage-free forward rate processes of HJM, some of which preclude the occurrence of negative interest rates by allowing interest rate level dependent volatilities. Conditions are derived under which the convexity risk measure may or may not be priced. Finally, we demonstrate that when Merton's [1973] ICAPM is identified with the above HJM [1992] forward rate processes, the appropriate equilibrium measure of the systematic risk of a default-free security is its duration, and not its bondbeta as derived by Jarrow [1978], and others, under more restrictive assumptions. This paper addresses all of the arbitrage-based and equilibrium-based criticisms of the duration risk measure given by Ingersoll [1978], Sharpe [1983], and others.","PeriodicalId":144511,"journal":{"name":"Chicago Booth Fama-Miller: Capital Markets (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-04-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131120353","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"An Analysis of Risk and Pricing Anomalies","authors":"T. Moskowitz","doi":"10.2139/ssrn.214169","DOIUrl":"https://doi.org/10.2139/ssrn.214169","url":null,"abstract":"This paper examines the link between several well-known asset pricing anomalies and covariance risk. Estimating the time-series of the covariance matrix of asset returns via a multivariate GARCH model, I quantify the contribution made by each anomaly to the covariance matrix of asset returns, as well as its ability to forecast future covariances. I find that anomalous returns associated with firm size are closely linked to the covariance matrix, while those associated with book-to-market equity are weakly linked. However, returns associated with momentum do not appear related to covariance risk and do not forecast future covariances. Finally, despite its lack of predictive power on the cross-section of expected returns, the market portfolio is the single most important factor contributing to and forecasting covariance risk.","PeriodicalId":144511,"journal":{"name":"Chicago Booth Fama-Miller: Capital Markets (Topic)","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"1999-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126460413","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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