integrVarRP: Integrated variance risk premia

In piotrek-orlowski/divergenceModelR: Divergence pricing and divergence-based affine model estimation

Description

Given the parameters and initial values, this function produces the term structure of the integrated variance risk premium. Definition of IVRP as in reference below. This function treats the case of no volatility jumps if control$use.CIR = TRUE.

Usage

integrVarRP(params.structure, v.0 = NULL, tT = c(0, 1),
  grid.d = 1000, N.factors = 3)

Arguments

params.structure	a named list of named lists that describe the P and Q behaviour of the stochastic volatility model.
v.0	initial condition for IVRP calculation, if NULL, long-run factor mean values are used instead.
tT	vector of length at least 2, start- and end-point of calculation. If the vector is lonver, the VRP will be returned at the intermediate values as well. Otherwise, the output values are determined via rp.control$grid.d.
grid.d	determines the number of intervals into which the tT period is divided

Value

Returns a list with fields tot, cont and jmp, referring to, respectively, the total risk premium, its continuous and discontinuous parts.

References

Ait-Sahalia, Y. and Karaman, M., and Mancini, L., “The Term Structure of Variance Risk Premia and the Expectation Hypothesis”

piotrek-orlowski/divergenceModelR documentation built on July 21, 2020, 11:51 a.m.