Non-parameteric news impact curve: a variational approach
Matthieu Garcin () and
Clément Goulet ()
Additional contact information
Matthieu Garcin: Natixis Asset Management et LabEX ReFi
Clément Goulet: Centre d'Economie de la Sorbonne et LabEX ReFi, https://centredeconomiesorbonne.univ-paris1.fr
Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne
Abstract:
In this paper, we propose an innovative methodology for modelling the news impact curve. The news impact curve provides a non-linear relation between past returns and current volatility and thus enables to forecast volatility. Our news impact curve is the solution of a dynamic optimization problem based on variational calculus. Consequently, it is a non-parametric and smooth curve. To our knowledge, this is the first time that such a method is used for volatility modelling. Applications on simulated heteroskedastic processes as well as on financial data show a better accuracy in estimation and forecast for this approach than for standard parametric (symmetric or asymmetric ARCH) or non-parametric (Kernel-ARCH) econometric techniques
Keywords: Volatility modeling; news impact curve; calculus of variations; wavelet theory; ARCH (search for similar items in EconPapers)
JEL-codes: C02 C14 C22 C51 C53 C58 C61 (search for similar items in EconPapers)
Date: 2015-09, Revised 2016-07
New Economics Papers: this item is included in nep-ecm, nep-for, nep-ore and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)
There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:15086r
Access Statistics for this paper
More papers in Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne Contact information at EDIRC.
Bibliographic data for series maintained by Lucie Label ().