Identifying financial instability conditions using high frequency data

Maria Elvira Mancino and Simona Sanfelici ()
Additional contact information
Simona Sanfelici: University of Parma

Journal of Economic Interaction and Coordination, 2020, vol. 15, issue 1, No 9, 242 pages

Abstract: Abstract We study an indicator of financial instability based on the computation of the decay rate for the propagation of a given market shock. The rate of variation through time of an initial perturbation of the price process enables us to understand if such a shock will be rapidly absorbed or, on the contrary, it will be amplified by the market. The indicator combines non-linearly volatility, leverage and covariance between leverage and price and is model-free. It provides an early warning indicator of instability for a given high frequency financial time series. A new consistency theorem for the estimator of each component of the proposed indicator is proved. The properties of the indicator are investigated numerically under the CEV model and empirically using tick-by-tick data of the S&P 500 index futures.

Keywords: Market stability; Shock propagation; Volatility; Leverage; Non-parametric estimation; Fourier transform (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s11403-019-00253-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

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:spr:jeicoo:v:15:y:2020:i:1:d:10.1007_s11403-019-00253-6

Ordering information: This journal article can be ordered from
http://www.springer. ... ry/journal/11403/PS2

DOI: 10.1007/s11403-019-00253-6

Access Statistics for this article

Journal of Economic Interaction and Coordination is currently edited by A. Namatame, Thomas Lux and Shu-Heng Chen

More articles in Journal of Economic Interaction and Coordination from Springer, Society for Economic Science with Heterogeneous Interacting Agents Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().