Abstract
In this paper, we utilize the Chicago Board Option Exchange (CBOE) implied volatility indices to estimate the time-frequency information transmission among financial markets from 01.08.2008 to 31.10.2019. In doing so, we utilize the rolling window wavelet correlation (RWWC), Diebold & Yilmaz (The Economic Journal 119: 158–171, 2012), and Barunik & Krehlik (Journal of Financial Econometrics 16: 271–296, 2018). Our empirical findings suggest short-term and long-term dynamic connectedness between implied volatility indices of alternative assets. The long-term analysis findings suggest potential hedging and diversification opportunities that can be exploited by taking offsetting positions across volatility indices. The findings confirm heterogeneity between short-term and long-term connectedness results. Our findings also show superior out of sample hedging effectiveness of GVZ. The implications of the findings are further discussed in the paper.
Original language | English |
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Journal | Annals of Operations Research |
DOIs | |
Publication status | Published - 14 Sept 2021 |
Externally published | Yes |
Bibliographical note
Funding Information:Muhammad Abubakr Naeem gratefully acknowledges the support of Science Foundation Ireland under grant number 16/SPP/3347.
Publisher Copyright:
© 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.