Volatility is log-normal -- but not for the reason you think
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- Volatility Is Log-Normal—But Not for the Reason You Think
Final published version, 1.09 MB, PDF document
It is impossible to discriminate between the commonly used stochastic volatility models of Heston, log-normal, and 3-over-2 on the basis of exponentially weighted averages of daily returns—even though it appears so at first sight. However, with a 5-min sampling frequency, the models can be differentiated and empirical evidence overwhelmingly favours a fast mean-reverting log-normal model.
Original language | English |
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Article number | 46 |
Journal | Risks |
Volume | 6 |
Issue number | 2 |
Number of pages | 16 |
ISSN | 2227-9091 |
DOIs | |
Publication status | Published - Jun 2018 |
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ID: 201613463