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.
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页数：8
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