Modeling dynamic volatility under uncertain environment with fuzziness and randomness

Xianfei Hui, Baiqing Sun, Hui Jiang and Yan Zhou

Papers from arXiv.org

Abstract: The problem related to predicting dynamic volatility in financial market plays a crucial role in many contexts. We build a new generalized Barndorff-Nielsen and Shephard (BN-S) model suitable for uncertain environment with fuzziness and randomness. This new model considers the delay phenomenon between price fluctuation and volatility changes, solves the problem of the lack of long-range dependence of classic models. Through the experiment of Dow Jones futures price, we find that compared with the classical model, this method effectively combines the uncertain environmental characteristics, which makes the prediction of dynamic volatility has more ideal performance.

Date: 2022-04, Revised 2022-10
New Economics Papers: this item is included in nep-big, nep-cmp, nep-ecm and nep-rmg
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