Implied option volatility averages about 19% per year, while the unconditional return volatility is only about 16%. The difference, coined the volatility premium, is substantial and translates into large returns for sellers of index options. This paper studies a general equilibrium model based on long-run risk which in an effort to explain the premium. In estimating the model on past data of st...

Implied volatility indices are becoming increasingly popular as a measure of market uncertainty and as a vehicle for developing derivative instruments to hedge against unexpected changes in volatility. Although jumps are widely considered as a salient feature of volatility, their implications for volatility options and futures are not yet fully understood. This paper provides evidence indicatin...

The relation between the volatility of stocks and bonds and their price valuations is strongly time-varying, both in magnitude and direction, defying traditional asset pricing models and conventional wisdom. We construct and estimate a model in which investors’ learning about regular and unusual fundamental states leads to a non-monotonic V −shaped relation between volatilities and prices. Stru...

the major challenge facing iranian economy is its overwhelming dependence on the oil exports. however, the world oil price has been subject to a lot of shocks, which have destabilized the iranian terms of trade. hence, this paper empirically examines the effect of terms of trade volatility on iran’s economic growth over 1967-2006. for this purpose, based on a garch model, a proxy for the terms ...

risk prediction plays an increasing role in financial risk management. this study aims to investigate existence of asymmetry and long memory volatility in tehran stock exchange index daily data over period of 1998-2006. 1467 daily index returns are used for volatility modeling via garch (long & short memory) processes for both normal and t-student innovations. the specification and forecasting ...

oil-exporting economies largely dependent on oil revenues and oil income fluctuation are one of the most important factors that influence sectors of the economy specially the stock market. this paper investigate the relationship between oil markets and stock return volatility and transmission in a selection of opec countries, using a multivariate garch models (full-vech) over the period may 201...

Macroeconomic Volatilities and the Labor Market: First Results from the Euro Experiment This paper analyzes the effects of different labor market institutions on inflation and output volatility. The eurozone offers an unprecedented experiment for this exercise: since 1999, no national monetary policies have been implemented that could account for volatility differences across member states, but...

The world trade collapsed in the most recent recession. Some analysts have suggested the increasing offshoring of the supply chain, or vertical specialization (VS) trade, can explain the apparent increase in volatility of trade over the business cycle. This paper develops a model of VS trade to examine its impact on the volatility of trade. The model features increased trade volatility as VS tr...

s tock returns of companies listed on the stock exchange is one of the most important criteria in assessing the macroeconomic. this study investigates the effect of exchange rate volatility on the stock exchange returns of d8 countries. it takes monthly data during the period (2008:1-2015:6) constituting 90 observations. at first we used panel-garch model to estimate exchange rate volatility in...

This paper provides a simple unified framework for assessing the empirical linkages between returns and realized and implied volatilities. First, we show that whereas the volatility feedback effect as measured by the sign of the correlation between contemporaneous return and realized volatility depends importantly on the underlying structural model parameters, the correlation between return and...