nep-mst New Economics Papers
on Market Microstructure
Issue of 2022‒05‒09
one paper chosen by
Thanos Verousis

  1. Extraction of deterministic components for high frequency stochastic process -- an application from CSI 300 index By Xianfei Hui; Baiqing Sun; Yan Zhou; Indranil SenGupta

  1. By: Xianfei Hui; Baiqing Sun; Yan Zhou; Indranil SenGupta
    Abstract: This paper models stochastic process of price time series of CSI 300 index in Chinese financial market, analyzes volatility characteristics of intraday high-frequency price data. In the new generalized Barndorff-Nielsen and Shephard model, the lag caused by asynchrony of market information is considered, and the problem of lack of long-term dependence is solved. To speed up the valuation process, several machine learning and deep learning algorithms are used to estimate parameter and evaluate forecast results. Tracking historical jumps of different magnitudes offers promising avenues for simulating dynamic price processes and predicting future jumps. Numerical results show that the deterministic component of stochastic volatility processes would always be captured over short and longer-term windows. Research finding could be suitable for influence investors and regulators interested in predicting market dynamics based on realized volatility.
    Date: 2022–04

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