Research Program on Financial Volatility
Program Director: Barry Ickes.
Volatility is a key feature of financial markets. Asset prices fluctuations are a major source of risk in financial markets. It is precisely through asset price fluctuations that financial markets allocate resources. Volatility is thus a central element of the financial system. Volatility is also a key measure of the riskiness of assets. In addition, however, volatility can be measured and estimated and it can be traded through dynamic trading strategies involving options and other derivatives.
Understanding the sources of financial volatility and the causes of movements in volatility is crucial for understanding the financial system. Financial crises can be thought as periods of extreme volatility. The projects in this research program study the methods for measuring volatility and models of the causes and consequences of fluctuations in volatility. We also are studying how market institutions impact financial volatility.