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- Title
Estimating Volatility Persistence in Oil Prices Under Structural Breaks.
- Authors
Ewing, Bradley T.; Malik, Farooq
- Abstract
Policy makers and financial market participants are interested in knowing how shocks affect the volatility of oil prices over time. We accurately compute the volatility persistence by incorporating endogenously determined structural breaks into a GARCH model. Contrary to previous findings, we find that oil shocks dissipate very quickly but have a strong initial impact. Understanding this behavior is not only important for derivative valuation and hedging decisions but for broader financial markets and the overall economy, for which there are significant consequences.
- Subjects
MARKET volatility; GARCH model; ALGORITHMS; FINANCE; DERIVATIVE securities; HEDGING (Finance)
- Publication
Financial Review, 2010, Vol 45, Issue 4, p1011
- ISSN
0732-8516
- Publication type
Article
- DOI
10.1111/j.1540-6288.2010.00283.x