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Oil Price Volatility and Asymmetric Leverage Effects

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  • Lee, Eunhee
  • Han, Doo Bong

Abstract

This study adopts a stochastic volatility (SV) model with two asymptotic regimes and a smooth transition for oil returns. We find that SV models with a smooth transition between two regimes imply an asymmetric leverage effect with different regimes. In particular, the half-life of a negative volatility shock is longer than that of a positive shock.

Suggested Citation

  • Lee, Eunhee & Han, Doo Bong, 2016. "Oil Price Volatility and Asymmetric Leverage Effects," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235480, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235480
    DOI: 10.22004/ag.econ.235480
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    References listed on IDEAS

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    4. Du, Xiaodong & Yu, Cindy L. & Hayes, Dermot J., 2011. "Speculation and volatility spillover in the crude oil and agricultural commodity markets: A Bayesian analysis," Energy Economics, Elsevier, vol. 33(3), pages 497-503, May.
    5. Anders B. Trolle & Eduardo S. Schwartz, 2009. "Unspanned Stochastic Volatility and the Pricing of Commodity Derivatives," The Review of Financial Studies, Society for Financial Studies, vol. 22(11), pages 4423-4461, November.
    6. Jacquier, Eric & Polson, Nicholas G & Rossi, Peter E, 2002. "Bayesian Analysis of Stochastic Volatility Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 69-87, January.
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    Keywords

    Resource/Energy Economics and Policy; Risk and Uncertainty;

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