Simultaneous occurrence of price jumps and changes in diffusive price volatility
Abstract
This paper uses high frequency financial data to study the changes in diffusive stock
price volatility when price jumps are likely to have occurred. In particular, we study
this effect on two levels. Firstly, we compare diffusive volatility on jump and non-jump
days. Secondly, we study the change in diffusive volatility in local windows before
and after 5-minute intervals on which price jumps are likely to have occurred. We
find evidence that market price jumps occur simultaneously with a change in diffusive
volatility with negative dependence in the direction of the jump and the volatility
change. However, a similar relationship is not detectable in individual stock price
data.
Type
Honors thesisDepartment
EconomicsPermalink
https://hdl.handle.net/10161/5133Citation
Wei, Shuting (2012). Simultaneous occurrence of price jumps and changes in diffusive price volatility.
Honors thesis, Duke University. Retrieved from https://hdl.handle.net/10161/5133.Collections
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