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Stochastic Volatility: Origins and Overview

  • Neil Shephard
  • Torben G. Andersen

In this paper we review the history and recent developments of stochastic volatility, which is the main way financial economists and mathematical finance specialists model time varying volatility.

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Paper provided by Oxford Financial Research Centre in its series OFRC Working Papers Series with number 2008fe23.

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Length: 21
Date of creation: 2008
Date of revision:
Handle: RePEc:sbs:wpsefe:2008fe23
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  2. Chernov, Mikhail & Gallant, A. Ronald & Ghysels, Eric & Tauchen, George, 2002. "Alternative Models for Stock Price Dynamic," Working Papers 02-03, Duke University, Department of Economics.
  3. Ghysels, E. & Harvey, A. & Renault, E., 1996. "Stochastic Volatility," Cahiers de recherche 9613, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  4. Barndorff-Nielsen, Ole E. & Shephard, Neil, 2006. "Impact of jumps on returns and realised variances: econometric analysis of time-deformed Levy processes," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 217-252.
  5. Ole E Barndorff-Nielsen & Peter Hansen & Asger Lunde & Neil Shephard, 2006. "Designing realised kernels to measure the ex-post variation of equity prices in the presence of noise," OFRC Working Papers Series 2006fe05, Oxford Financial Research Centre.
  6. Gallant, A. Ronald & Hsieh, David & Tauchen, George, 1995. "Estimation of Stochastic Volatility Models with Diagnostics," Working Papers 95-36, Duke University, Department of Economics.
  7. Marc Yor & Dilip B. Madan & Hélyette Geman, 2002. "Stochastic volatility, jumps and hidden time changes," Finance and Stochastics, Springer, vol. 6(1), pages 63-90.
  8. Durham, Garland B., 2003. "Likelihood-based specification analysis of continuous-time models of the short-term interest rate," Journal of Financial Economics, Elsevier, vol. 70(3), pages 463-487, December.
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  18. Dong-Hyun Ahn & Robert F. Dittmar, 2002. "Quadratic Term Structure Models: Theory and Evidence," Review of Financial Studies, Society for Financial Studies, vol. 15(1), pages 243-288, March.
  19. Shephard, Neil (ed.), 2005. "Stochastic Volatility: Selected Readings," OUP Catalogue, Oxford University Press, number 9780199257201, March.
  20. Durham, Garland B & Gallant, A Ronald, 2002. "Numerical Techniques for Maximum Likelihood Estimation of Continuous-Time Diffusion Processes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(3), pages 297-316, July.
  21. Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March.
  22. Darrell Duffie & Kenneth J. Singleton, 1990. "Simulated Moments Estimation of Markov Models of Asset Prices," NBER Technical Working Papers 0087, National Bureau of Economic Research, Inc.
  23. Gourieroux, C. & Monfort, A. & Renault, E., 1992. "Indirect Inference," Papers 92.279, Toulouse - GREMAQ.
  24. Francis X. Diebold & Marc Nerlove, 1986. "The dynamics of exchange rate volatility: a multivariate latent factor ARCH model," Special Studies Papers 205, Board of Governors of the Federal Reserve System (U.S.).
  25. Andersen, Torben G. & Bollerslev, Tim & Diebold, Francis X. & Vega, Clara, 2007. "Real-time price discovery in global stock, bond and foreign exchange markets," Journal of International Economics, Elsevier, vol. 73(2), pages 251-277, November.
  26. Meddahi, Nour & Mykland, Per & Shephard, Neil, 2011. "Realized Volatility," Journal of Econometrics, Elsevier, vol. 160(1), pages 1-1, January.
  27. Danielsson, J & Richard, J-F, 1993. "Accelerated Gaussian Importance Sampler with Application to Dynamic Latent Variable Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S153-73, Suppl. De.
  28. Gallant, A. Ronald & Tauchen, George, 1996. "Which Moments to Match?," Econometric Theory, Cambridge University Press, vol. 12(04), pages 657-681, October.
  29. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold & Clara Vega, 2005. "Real-Time Price Discovery in Stock, Bond and Foreign Exchange Markets," NBER Working Papers 11312, National Bureau of Economic Research, Inc.
  30. Andersen, Torben G. & Lund, Jesper, 1997. "Estimating continuous-time stochastic volatility models of the short-term interest rate," Journal of Econometrics, Elsevier, vol. 77(2), pages 343-377, April.
  31. Ole E. Barndorff-Nielsen & Neil Shephard, 2001. "Non-Gaussian Ornstein-Uhlenbeck-based models and some of their uses in financial economics," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 63(2), pages 167-241.
  32. Black, Fischer & Scholes, Myron S, 1972. "The Valuation of Option Contracts and a Test of Market Efficiency," Journal of Finance, American Finance Association, vol. 27(2), pages 399-417, May.
  33. Qiang Dai & Kenneth J. Singleton, 2000. "Specification Analysis of Affine Term Structure Models," Journal of Finance, American Finance Association, vol. 55(5), pages 1943-1978, October.
  34. Chernov, Mikhail & Ghysels, Eric, 2000. "A study towards a unified approach to the joint estimation of objective and risk neutral measures for the purpose of options valuation," Journal of Financial Economics, Elsevier, vol. 56(3), pages 407-458, June.
  35. Back, Kerry, 1991. "Asset pricing for general processes," Journal of Mathematical Economics, Elsevier, vol. 20(4), pages 371-395.
  36. Breidt, F. Jay & Crato, Nuno & de Lima, Pedro, 1998. "The detection and estimation of long memory in stochastic volatility," Journal of Econometrics, Elsevier, vol. 83(1-2), pages 325-348.
  37. Nelson, Daniel B., 1990. "ARCH models as diffusion approximations," Journal of Econometrics, Elsevier, vol. 45(1-2), pages 7-38.
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