The cross-market index for volatility surprise
Copyright policy )The cross-market index for volatility surprise
This article proposes a new empirical methodology for computing a cross-market volatility index – coined CMIX – based on the Factor-Dynamic Conditional Correlation (DCC) model, implemented on volatility surprises. This approach solves problems in treating high-dimensional data and estimating time-varying conditional correlations. We provide an application to multi-asset market data composed of equities, bonds, foreign exchange rates and commodities during 1983–2013. This new methodology may be attractive to asset managers, because it provides a simple way to hedge multi-asset portfolios with derivatives contracts written on the CMIX.
JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G10 - General, G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading [JEL], C.C5.C51, 330, G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates [JEL], Economie financière, C.C5.C58, 332, C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C58 - Financial Econometrics [JEL], C.C2.C22, G - Financial Economics/G.G1 - General Financial Markets/G.G1.G10 - General [JEL], volatility surprise, JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C58 - Financial Econometrics, JEL: C - Mathematical and Quantitative Methods/C.C2 - Single Equation Models • Single Variables, C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation [JEL], [ SHS.GESTION ] Humanities and Social Sciences/Business administration, G.G1.G10, Factor-DCC, G.G1.G14, G.G1.G12, JEL: C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables, C.C3.C32, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading, C - Mathematical and Quantitative Methods/C.C2 - Single Equation Models • Single Variables [JEL], C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables [JEL], asset management, [SHS.GESTION]Humanities and Social Sciences/Business administration, cross-market index, [SHS.GESTION] Humanities and Social Sciences/Business administration, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates, jel: jel:G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading, jel: jel:C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation, jel: jel:C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C58 - Financial Econometrics, jel: jel:C - Mathematical and Quantitative Methods/C.C2 - Single Equation Models • Single Variables, jel: jel:G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates, jel: jel:C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables, jel: jel:G - Financial Economics/G.G1 - General Financial Markets/G.G1.G10 - General
JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G10 - General, G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading [JEL], C.C5.C51, 330, G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates [JEL], Economie financière, C.C5.C58, 332, C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C58 - Financial Econometrics [JEL], C.C2.C22, G - Financial Economics/G.G1 - General Financial Markets/G.G1.G10 - General [JEL], volatility surprise, JEL: C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C58 - Financial Econometrics, JEL: C - Mathematical and Quantitative Methods/C.C2 - Single Equation Models • Single Variables, C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation [JEL], [ SHS.GESTION ] Humanities and Social Sciences/Business administration, G.G1.G10, Factor-DCC, G.G1.G14, G.G1.G12, JEL: C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables, C.C3.C32, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading, C - Mathematical and Quantitative Methods/C.C2 - Single Equation Models • Single Variables [JEL], C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables [JEL], asset management, [SHS.GESTION]Humanities and Social Sciences/Business administration, cross-market index, [SHS.GESTION] Humanities and Social Sciences/Business administration, JEL: G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates, jel: jel:G - Financial Economics/G.G1 - General Financial Markets/G.G1.G14 - Information and Market Efficiency • Event Studies • Insider Trading, jel: jel:C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C51 - Model Construction and Estimation, jel: jel:C - Mathematical and Quantitative Methods/C.C5 - Econometric Modeling/C.C5.C58 - Financial Econometrics, jel: jel:C - Mathematical and Quantitative Methods/C.C2 - Single Equation Models • Single Variables, jel: jel:G - Financial Economics/G.G1 - General Financial Markets/G.G1.G12 - Asset Pricing • Trading Volume • Bond Interest Rates, jel: jel:C - Mathematical and Quantitative Methods/C.C3 - Multiple or Simultaneous Equation Models • Multiple Variables, jel: jel:G - Financial Economics/G.G1 - General Financial Markets/G.G1.G10 - General
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