Modelling the spreading process of extreme risks via a simple agent-based model: Evidence from the China stock market
Jingru Ji and
Additional contact information
Jingru Ji: Department of Finance, East China University of Science and Technology
Donghua Wang: Department of Finance, East China University of Science and Technology
No 1806, Working Papers from University of Waterloo, Department of Economics
This paper focuses on investigating financial returns' extreme risks, which are defined as the negative log-returns over a certain threshold. A simple agent-based model is constructed to explain the behavior of the market traders when extreme risks occur. We consider both the volatility clustering and the heavy tail characteristics when constructing the model. Empirical study uses the China securities index 300 daily level data and applies the method of simulated moments to estimate the model parameters. The stationarity and ergodicity tests provide evidence that the proposed model is good for estimation and prediction. The goodness-of-fit measures show that our proposed model fits the empirical data well. Our estimated model performs well in out-of-sample Value-at-Risk prediction, which contributes to the risk management.
JEL-codes: C15 C52 G15 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2018-01-09, Revised 2018-01-09
New Economics Papers: this item is included in nep-cna, nep-ore, nep-rmg and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://uwaterloo.ca/economics/sites/ca.economics/ ... xu_working_paper.pdf (application/pdf)
Journal Article: Modelling the spreading process of extreme risks via a simple agent-based model: Evidence from the China stock market (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wat:wpaper:1806
Access Statistics for this paper
More papers in Working Papers from University of Waterloo, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Sherri Anne Arsenault ().