The real options approach to valuation - Haskayne School of Business
The real options approach to valuation - Haskayne School of Business
The real options approach to valuation - Haskayne School of Business
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Procedure • Thus, fac<strong>to</strong>rs that explain futures returns cannot explain changes in vola*lity • We then fac<strong>to</strong>r analyze the covariance matrix <strong>of</strong> the residuals from these regressions. If there is unspanned s<strong>to</strong>chas*c vola*lity in the data we should see large common varia*on in the residuals • We find that typically the first two PC explain over 80% <strong>of</strong> the varia*on in the residuals