Term Structure in the SVJD Model - Volatility, Skew, Kurtosis and Return Distributions
Document ID: 2008-1224 (previously 2008/009)
Published on: 28th November 2008
Author: Nick Jessop
In this note we derive analytic expressions for the variance of log-returns over different time horizons, and for the short term skew and kurtosis in the stochastic volatility jump diffusion (SVJD) model.
The model is described in Technical Note 2008/12. It is a mixture of two well known model – Heston’s Stochastic Volatility Model, and Merton’s Jump Diffusion Model.
These results are useful in calibrating the model to real world distributional targets.
