DETECTING VOLATILITY CHANGES ACROSS THE OIL SECTOR: INTRODUCTION

The presence of sudden changes in variance of financial time series has important implications for understanding the price sensitivity and hedging risks involved in derivative securities, such as options and futures contracts. In this article an iterated cumulative sums-of-squares methodology is use...

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Bibliographic Details
Published in:The journal of futures markets 1996-05, Vol.47 (1), p.313
Main Authors: Berry, Wilson, Aggarwal, Reena, Inclan, Carla
Format: Article
Language:English
Subjects:
Algorithms
Futures market
Futures trading
Hedging
Prices
Stock exchanges
Time series
Volatility
Online Access:Get full text
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Summary:The presence of sudden changes in variance of financial time series has important implications for understanding the price sensitivity and hedging risks involved in derivative securities, such as options and futures contracts. In this article an iterated cumulative sums-of-squares methodology is used to identify points and the magnitude of sudden changes in the unconditional variance. As Lamoreux and Lastrapes (1990) discuss, the pricing of contingent claims depends on the perception of how permanent the shocks are.
ISSN:0270-7314
1096-9934