{"title":"Is the Variance Swap Rate Affine in the Spot Variance? Evidence from S&P500 Data","authors":"M. Mancino, Simone Scotti, Giacomo Toscano","doi":"10.2139/ssrn.3571429","DOIUrl":null,"url":null,"abstract":"ABSTRACT We empirically investigate the functional link between the variance swap rate and the spot variance. Using S&P500 data over the period 2006–2018, we find overwhelming empirical evidence supporting the affine link implied by exponential affine stochastic volatility models. Tests on yearly subsamples suggest that exponential mean-reverting variance models provide a good fit during periods of extreme volatility, while polynomial modelsare suited for years characterized by more frequent price jumps.","PeriodicalId":35818,"journal":{"name":"Applied Mathematical Finance","volume":"154 1","pages":"288 - 316"},"PeriodicalIF":0.0000,"publicationDate":"2020-04-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"3","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Applied Mathematical Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3571429","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q3","JCRName":"Mathematics","Score":null,"Total":0}
引用次数: 3
Abstract
ABSTRACT We empirically investigate the functional link between the variance swap rate and the spot variance. Using S&P500 data over the period 2006–2018, we find overwhelming empirical evidence supporting the affine link implied by exponential affine stochastic volatility models. Tests on yearly subsamples suggest that exponential mean-reverting variance models provide a good fit during periods of extreme volatility, while polynomial modelsare suited for years characterized by more frequent price jumps.
期刊介绍：
The journal encourages the confident use of applied mathematics and mathematical modelling in finance. The journal publishes papers on the following: •modelling of financial and economic primitives (interest rates, asset prices etc); •modelling market behaviour; •modelling market imperfections; •pricing of financial derivative securities; •hedging strategies; •numerical methods; •financial engineering.
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