Are Volatility Expectations in Different Countries Interdependent? A Data-Driven Solution to Structural VAR Identification for Implied Equity Volatility Indices

Authors

Timothy de Silva, Claremont McKenna CollegeFollow

Abstract

Over the past couple of decades, the number of volatility indices has increased rapidly. Although the dynamics of realized volatility spillover have been studied extensively, very few studies exist that examine the spillover between these implied volatility indices. By using DAG-based structural vector autoregression, this paper provides evidence that implied volatility spillover differs from realized volatility spillover. Through solving the well-known VAR identification problem for these indices, this paper finds that Asia, more specifically Hong Kong, plays a central role in implied volatility spillover during and after the 2008 financial crisis.

Recommended Citation

de Silva, Timothy (2017) "Are Volatility Expectations in Different Countries Interdependent? A Data-Driven Solution to Structural VAR Identification for Implied Equity Volatility Indices," Undergraduate Economic Review: Vol. 14: Iss. 1, Article 8.
Available at: https://digitalcommons.iwu.edu/uer/vol14/iss1/8