Stochastic volatility models for the implied correlation index. Evidence, properties and pricing

被引：1

作者：

Escobar, Marcos ^{[1
]}

Fang, Lin ^{[1
]}

机构：

[1] Western Univ, Dept Stat & Actuarial Sci, London, ON, Canada

来源：

FINANCE RESEARCH LETTERS | 2020年 / 35卷

关键词：

Implied correlation index; Stochastic volatility models; Mean reversion; Correlation derivatives; BOND;

D O I：

10.1016/j.frl.2020.101309

中图分类号：

F8 [财政、金融];

学科分类号：

0202 ;

摘要：

This paper studies the implied correlation index (CIX), revealing a new stylized fact: heteroscedasticity in correlation. A correlation stochastic volatility (C-SV) model is proposed and a consistent estimation methodology is implemented on CBOE S&P 500 CIX historical data. The impact of the SV parameters is studied for two types of crisis-motivated CIX derivatives, and the empirical study demonstrates that new parameters can have a significant influence of up to 60% on digital option prices.

引用

页数：8

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