Volatility in Financial Markets: Stochastic Models and Empirical Results

Preprint

28 February 2002

preprint
Published by arXiv in arXiv

https://doi.org/10.48550/arXiv.cond-mat/0202527

Abstract

We investigate the historical volatility of the 100 most capitalized stocks traded in US equity markets. An empirical probability density function (pdf) of volatility is obtained and compared with the theoretical predictions of a lognormal model and of the Hull and White model. The lognormal model well describes the pdf in the region of low values of volatility whereas the Hull and White model better approximates the empirical pdf for large values of volatility. Both models fails in describing the empirical pdf over a moderately large volatility range.

Keywords

PROBABILITY DENSITY FUNCTION
VALUES OF VOLATILITY
FINANCIAL MARKETS
STOCHASTIC MODELS
HULL AND WHITE
STOCKS
EQUITY
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All Related Versions

Version 1, 2002-02-28, ArXiv
Published version: Physica A: Statistical Mechanics and its Applications, 314 (1-4), 756.

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