African Journal of
Business Management

  • Abbreviation: Afr. J. Bus. Manage.
  • Language: English
  • ISSN: 1993-8233
  • DOI: 10.5897/AJBM
  • Start Year: 2007
  • Published Articles: 4194

Full Length Research Paper

The jump-diffusion process for the VIX and the S&P 500 index

  Chi-Tai Lin1 and Yen-Hsien Lee2*
  1Department of Banking and Finance, TamKang University No. 151, Ying-Chuan Rd., Danshuei Township, Taipei County 251, Taiwan.  2Department of Finance, Chung Yuan Christian University, 200 Chung Pei Rd., Chung Li, Taiwan 320, R.O.C.
Email: [email protected]

  •  Accepted: 31 May 2010
  •  Published: 31 August 2010

Abstract

 

This paper applies the CBP-GARCH model of Chan (2003) to analyze the discontinuous jump and the time-varying correlated jump intensity for the changes in the VIX and the S&P 500 returns over the period extending from January 15, 2001 to December 31, 2009. The empirical results provide evidence of the significant jump-diffusion process and the causal relationships in the bi-directions between the S&P 500 returns and the changes in the VIX. In addition, the relationships between the S&P 500 returns and the changes in the VIX exhibit joint jump behavior are not time varying.

 

Key words: VIX, CBP-GARCH model, jump-diffusion process.

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This article is published under the terms of the Creative Commons Attribution License 4.0

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