Multiple time scales and the exponential Ornstein–Uhlenbeck stochastic volatility model
- 1 October 2006
- journal article
- research article
- Published by Taylor & Francis in Quantitative Finance
- Vol. 6 (5) , 423-433
- https://doi.org/10.1080/14697680600727547
Abstract
We study the exponential Ornstein–Uhlenbeck stochastic volatility model and observe that the model shows a multiscale behaviour in the volatility autocorrelation. It also exhibits a leverage correlation and a probability profile for the stationary volatility which are consistent with market observations. All these features make the model quite appealing since it appears to be more complete than other stochastic volatility models also based on a two-dimensional diffusion. We finally present an approximate solution for the return probability density designed to capture the kurtosis and skewness effects.Keywords
All Related Versions
This publication has 32 references indexed in Scilit:
- Theory of Financial Risk and Derivative PricingPublished by Cambridge University Press (CUP) ,2003
- Multifractal stationary random measures and multifractal random walks with log infinitely divisible scaling lawsPhysical Review E, 2002
- Multifractality in Asset Returns: Theory and EvidenceThe Review of Economics and Statistics, 2002
- Leverage Effect in Financial Markets: The Retarded Volatility ModelPhysical Review Letters, 2001
- Multifractal random walkPhysical Review E, 2001
- Asymmetric Volatility and Risk in Equity MarketsThe Review of Financial Studies, 2000
- Fractionally integrated generalized autoregressive conditional heteroskedasticityJournal of Econometrics, 1996
- Long memory processes and fractional integration in econometricsJournal of Econometrics, 1996
- A long memory property of stock market returns and a new modelJournal of Empirical Finance, 1993
- Generalized autoregressive conditional heteroskedasticityJournal of Econometrics, 1986