Estimation of objective and risk-neutral distributions based on moments of integrated volatility
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- 作者：René ; Garcia ; Marc-André ; Lewis ; Sergio Pastorello ; É ; ric Renault
- 关键词：Realized volatility ; Implied volatility ; Volatility risk premium ; Moments of integrated volatility ; Objective distribution ; Risk-neutral distribution
- 刊名：Journal of Econometrics
- 出版年：2011
- 出版时间：January 2011
- 年：2011
- 卷：160
- 期：1
- 页码：22-32
- 全文大小：306 K
文摘
In this paper, we present an estimation procedure which uses both option prices and high-frequency spot price feeds to estimate jointly the objective and risk-neutral parameters of stochastic volatility models. The procedure is based on a method of moments that uses analytical expressions for the moments of the integrated volatility and series expansions of option prices and implied volatilities. This results in an easily implementable and rapid estimation technique. An extensive Monte Carlo study compares various procedures and shows the efficiency of our approach. Empirical applications to the Deutsche mark–US dollar exchange rate futures and the S&P 500 index provide evidence that the method delivers results that are in line with the ones obtained in previous studies where much more involved estimation procedures were used.