Handbook of modeling high-frequency data in finance / edited by Frederi G. Viens, Maria C. Mariani, Ionut Florescu.

Format:

Book

Contributor:

Viens, Frederi G., 1969-

Mariani, Maria C.

Florescu, Ionuţ, 1973-

Series:

Wiley handbooks in financial engineering and econometrics

Language:

English

Subjects (All):

Finance--Econometric models.

Finance.

Physical Description:

xiv, 441 pages : illustrations ; 25 cm.

Place of Publication:

Hoboken, N.J. : Wiley, [2012]

Summary:

"This exciting volume presents cutting-edge developments in high frequency financial econometrics, spanning a diverse range of topics: stochastic modeling, statistical analysis of high-frequency data, models in econophysics, applications to the analysis of high-frequency data, systems and complex adaptive systems in finance, among a host of others. Written, in part, on the outgrowth of several recent conferences in the subject matter and in concert with over two-dozen experts in the field, the main purpose of the handbook is to mathematically illustrate the fundamental implementation of high-frequency models in the banking and financial industries, both at home and abroad, through use of real-world, time-sensitive applications. By using examples derived from consulting projects, current research and course instruction, each chapter in the book offers a systematic understanding of the recent advances in high-frequency modeling related to real-world situations. Every effort is made to present a balanced treatment between theory and practice, as well as to showcase how accuracy and efficiency in implementing various methods can be used as indispensable tools. To by-pass tedious computation, software illustrations are presented in an assortment of packages, ranging from R, C++, EXCEL-VBA, Minitab, to JMP/SAS. Shedding light on some of the most relevant open questions in the analysis of high-frequency data, this volume will be of interest to graduate students, researchers and industry professionals"-- Provided by publisher.

"The book offers a systematic understanding of the recent advances in high-frequency modeling related to real-world situations"-- Provided by publisher.

Contents:

Part 1 Analysis of Empirical Data 1

1 Estimation of Nig and Vg models for High Frequency Financial Data / José E. Figueroa-López Figueroa-López, José E., Steven R. Lancette Lancette, Steven R., Kiseop Lee Lee, Kiseop, Yanhui Mi Mi, Yanhui 3

1.1 Introduction 3

1.2 The Statistical Models 6

1.3 Parametric Estimation Methods 9

1.4 Finite-Sample Performance via Simulations 14

1.5 Empirical Results 18

1.6 Conclusion 22

References 24

2 A Study of Persistence of Price Movement using High Frequency Financial Data / Dragos Bozdog Bozdog, Dragos, Ionut Florescu Florescu, Ionut, Khaldoun Khashanah Khashanah, Khaldoun, Jim Wang Wang, Jim 27

2.1 Introduction 27

2.2 Methodology 29

2.3 Results 35

2.4 Rare Events Distribution 41

2.5 Conclusions 44

References 45

3 Using Boosting for Financial Analysis and Trading / Germán Creamer Creamer, Germán 47

3.1 Introduction 47

3.2 Methods 48

3.3 Performance Evaluation 53

3.4 Earnings Prediction and Algorithmic Trading 60

3.5 Final Comments and Conclusions 66

References 69

4 Impact of Correlation Fluctuations on Securitized Structures / Eric Hillebrand Hillebrand, Eric, Ambar N. Sengupta Sengupta, Ambar N., Junyue Xu Xu, Junyue 75

4.1 Introduction 75

4.2 Description of the Products and Models 77

4.3 Impact of Dynamics of Default Correlation on Low-Frequency Tranches 79

4.4 Impact of Dynamics of Default Correlation on High-Frequency Tranches 87

4.5 Conclusion 92

References 94

5 Construction of Volatility Indices Using a Multinomial Tree Approximation Method / Dragos Bozdog Bozdog, Dragos, Ionut Florescu Florescu, Ionut, Khaldoun Khashanah Khashanah, Khaldoun, Hongwei Qiu Qiu, Hongwei 97

5.1 Introduction 97

5.2 New Methodology 99

5.3 Results and Discussions 101

5.4 Summary and Conclusion 110

References 115

Part 2 Long Range Dependence Models 117

6 Long Correlations Applied to the Study of Memory Effects in High Frequency (TICK) Data, the Dow Jones Index, and International Indices / Ernest Barany Barany, Ernest, Maria Pia Beccar Varela Varela, Maria Pia Beccar 119

6.1 Introduction 119

6.2 Methods Used for Data Analysis 122

6.3 Data 128

6.4 Results and Discussions 132

6.5 Conclusion 150

References 160

7 Risk Forecasting with GARCH, Skewed t Distributions, and Multiple Timescales / Alec N. Kercheval Kercheval, Alec N., Yang Liu Liu, Yang 163

7.1 Introduction 163

7.2 The Skewed t Distributions 165

7.3 Risk Forecasts on a Fixed Timescale 176

7.4 Multiple Timescale Forecasts 185

7.5 Backtesting 188

7.6 Further Analysis: Long-Term GARCH and Comparisons using Simulated Data 203

7.7 Conclusion 216

References 217

8 Parameter Estimation and Calibration for Long-Memory Stochastic Volatility Models / Alexandra Chronopoulou Chronopoulou, Alexandra 219

8.1 Introduction 219

8.2 Statistical Inference Under the LMSV Model 222

8.3 Simulation Results 227

8.4 Application to the S&P Index 228

8.5 Conclusion 229

References 230

Part 3 Analytical Results 233

9 A Market Microstructure Model of Ultra High Frequency Trading / Carlos A. Ulibarri Ulibarri, Carlos A., Peter C. Anselmo Anselmo, Peter C. 235

9.1 Introduction 235

9.2 Microstmctural Model 237

9.3 Static Comparisons 239

9.4 Questions for Future Research 241

References 242

10 Multivariate Volatility Estimation with High Frequency Data Using Fourier Method / Maria Elvira Mancino Mancino, Maria Elvira, Simona Sanfelici Sanfelici, Simona 243

10.1 Introduction 243

10.2 Fourier Estimator of Multivariate Spot Volatility 246

10.3 Fourier Estimator of Integrated Volatility in the Presence of Microstructure Noise 252

10.4 Fourier Estimator of Integrated Covariance in the Presence of Microstructure Noise 263

10.5 Forecasting Properties of Fourier Estimator 272

10.6 Application: Asset Allocation 286

References 290

11 The "Retirement" Problem / Cristian Pasarica Pasarica, Cristian 295

11.1 Introduction 295

11.2 The Market Model 296

11.3 Portfolio and Wealth Processes 297

11.4 Utility Function 299

11.5 The Optimization Problem in the Case π_{τ, T} = 0 299

11.6 Duality Approach 300

11.7 Infinite Horizon Case 305

References 324

12 Stochastic Differential Equations and Levy Models with Applications to High Frequency Data / Ernest Barany Barany, Ernest, Maria Pia Beccar Varela Varela, Maria Pia Beccar 327

12.1 Solutions to Stochastic Differential Equations 327

12.2 Stable Distributions 334

12.3 The Levy Flight Models 336

12.4 Numerical Simulations and Levy Models: Applications to Models Arising in Financial Indices and High Frequency Data 340

12.5 Discussion and Conclusions 345

References 346

13 Solutions to Integro-Differential Parabolic Problem Arising on Financial Mathematics / Maria C. Mariani Mariani, Maria C., Marc Solas Solas, Marc, Indranil SenGupta SenGupta, Indranil 347

13.1 Introduction 347

13.2 Method of Upper and Lower Solutions 351

13.3 Another Iterative Method 364

13.4 Integro-Differential Equations in a Lévy Market 375

References 380

14 Existence of Solutions for Financial Models with Transaction Costs and Stochastic Volatility / Maria C. Mariani Mariani, Maria C., Emmanuel K. Ncheuguim Ncheuguim, Emmanuel K., Indranil SenGupta SenGupta, Indranil 383

14.1 Model with Transaction Costs 383

14.2 Review of Functional Analysis 386

14.3 Solution of the Problem (14.2) and (14.3) in Sobolev Spaces 391

14.4 Model with Transaction Costs and Stochastic Volatility 400

14.5 The Analysis of the Resulting Partial Differential Equation 408

References 418.

Notes:

Includes bibliographical references and index.

ISBN:

9780470876886

0470876883

OCLC:

724644259

Online:

Cover image