On Leverage in a Stochastic Volatility Model

• Main Author: YU, Jun
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2005
• Subjects: Bayes factors; Leverage effect; Markov chain Monte Carlo; Nonlinear state space models; Quasi maximum likelihood; Particle filter; Econometrics
• Online Access: https://ink.library.smu.edu.sg/soe_research/276; https://ink.library.smu.edu.sg/context/soe_research/article/1275/viewcontent/leverage.pdf
• Institution: Singapore Management University

This paper is concerned with the specification for modelling financial leverage effect in the context of stochastic volatility (SV) models. Two alternative specifications co-exist in the literature. One is the Euler approximation to the well-known continuous time SV model with leverage effect and th...