Bayesian DEJD Model and Detection of Asymmetry in Jump Sizes

Maciej Kostrzewski ()
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Maciej Kostrzewski: Cracow University of Economics

Central European Journal of Economic Modelling and Econometrics, 2015, vol. 7, issue 1, 43-70

Abstract: News might trigger jump arrivals in financial time series. The "bad" news and "good" news seem to have distinct impact. In the research, a double exponential jump distribution is applied to model downward and upward jumps. Bayesian double exponential jump-diffusion model is proposed. Theorems stated in the paper enable estimation of the model’s parameters, detection of jumps and analysis of jump frequency. The methodology, founded upon the idea of latent variables, is illustrated with simulated data.

Keywords: double exponential jump diffusion model; Kou model; Bernoulli jump-diffusion model; MCMC methods; latent variables (search for similar items in EconPapers)
JEL-codes: C58 G17 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:psc:journl:v:7:y:2015:i:1:p:43-70

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