Price jumping mechanism and parameter estimation based on filtered poisson process

Shijia Song () and Handong Li
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Shijia Song: School of Systems Science, Beijing Normal University, Beijing 100875, P. R. China
Handong Li: School of Systems Science, Beijing Normal University, Beijing 100875, P. R. China

International Journal of Modern Physics C (IJMPC), 2023, vol. 34, issue 01, 1-19

Abstract: By observing the actual movement of asset prices, we find that there is a persistent shock impact of jumps on prices rather than a transient effect. To address this phenomenon, we propose a new jump-diffusion model that restores the process of price by assuming that its continuous changes are determined by the diffusion process, while individual jumps are inscribed by a filtered Poisson process. We also come up with estimation methods for the parameters involved in the jump process, as well as methods for identifying jumps and determining the duration of the transit impact of jumps based on the actual price series. In terms of simulations, the consistency of the estimation results is verified in detail. Finally, we select two representative indexes in the China’s stock market as empirical objects. We build the price models, perform jump tests and parameter estimation for them, and compare the results with that of the traditional multi-sample BN-s to demonstrate the validity and robustness of the proposed models and estimation methods.

Keywords: Filtered Poisson process; price jump; jump-diffusion model; price dynamics (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0129183123500110

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