Forecasting volatility in the presence of Leverage Effect

Jean-Christophe Domenge (1) , Rémi Rhodes (2) , Vincent Vargas (2)

1 LPTMC - Laboratoire de Physique Théorique de la Matière Condensée
2 CEREMADE - CEntre de REcherches en MAthématiques de la DEcision

We define a simple and tractable method for adding the Leverage effect in general volatility predictions. As an application, we compare volatility predictions with and without Leverage on the SP500 Index during the period 2002-2010.

Domaines: Finance quantitative [q-fin.CP]

Jean-Christophe Domenge, Rémi Rhodes, Vincent Vargas. Forecasting volatility in the presence of Leverage Effect. 2010. ⟨hal-00502273⟩