
Julien Guyon – 01/08/23
Quantcast – a Risk.net Cutting Edge podcast
The Importance of Path-Dipotent Volatility Models
In 2014 I published a paper entitled Path-Dipotent Volatility about precisely those models. The joint spot-vole dynamics in the market is show the feedback from prices to volatility, but not just through the value of the asset price. For instance, the VIX is always very high if the S&P loses 10% of its value in two weeks - even if it's large. So that really means that actually the feedback should be from past returns and recent past returns rather than just the current asset price. And that's precisely what I wanted to dig in more depth.
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