• Title/Summary/Keyword: volatility asset model

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A Bootstrap Lagrangian Multiplier Test for Market Microstructure Noise in Financial Assets (금융자산의 시장 미시구조 잡음에 대한 부트스트래핑 라그랑지 승수 검정)

  • Kim, Hyo Jin;Shin, Dong Wan;Park, Jonghun;Lee, Sang-Goo
    • The Korean Journal of Applied Statistics
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    • v.28 no.2
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    • pp.189-200
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    • 2015
  • Stationary bootstrapping is applied to a Lagrangian multiplier (LM) test to test market microstructure noise (MMN) in financial asset prices. A Monte-Carlo experiment shows that the bootstrapping method improves the size of the original LM test which has some size distortion for conditional heteroscedastic models. The proposed test is illustrated for real data sets like KOSPI index and Won-Dollar exchange rate.

Numerical studies on approximate option prices (근사적 옵션 가격의 수치적 비교)

  • Yoon, Jeongyoen;Seung, Jisu;Song, Seongjoo
    • The Korean Journal of Applied Statistics
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    • v.30 no.2
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    • pp.243-257
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    • 2017
  • In this paper, we compare several methods to approximate option prices: Edgeworth expansion, A-type and C-type Gram-Charlier expansions, a method using normal inverse gaussian (NIG) distribution, and an asymptotic method using nonlinear regression. We used two different types of approximation. The first (called the RNM method) approximates the risk neutral probability density function of the log return of the underlying asset and computes the option price. The second (called the OPTIM method) finds the approximate option pricing formula and then estimates parameters to compute the option price. For simulation experiments, we generated underlying asset data from the Heston model and NIG model, a well-known stochastic volatility model and a well-known Levy model, respectively. We also applied the above approximating methods to the KOSPI200 call option price as a real data application. We then found that the OPTIM method shows better performance on average than the RNM method. Among the OPTIM, A-type Gram-Charlier expansion and the asymptotic method that uses nonlinear regression showed relatively better performance; in addition, among RNM, the method of using NIG distribution was relatively better than others.

Empirical Study on Credit Spreads in Korea Corporate Market : Using Mean-Reverting Leverage Ratio Model (목표부채비율 회귀 모형을 이용한 한국채권시장의 신용가산금리에 대한 실증연구)

  • Kim, Jae-Woo;Kim, Hwa-Sung
    • The Korean Journal of Financial Management
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    • v.22 no.1
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    • pp.93-118
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    • 2005
  • This paper examines credit spreads in Korea corporate market using one of structural models, the mean reverting leverage ratio model (Collin-Dufresne and Goldstein (2001)). Compared to the actual credit spreads, we show that the credit spreads induced by the model are overpredicted. We also investigate the systematic errors that cause the over-pre-diction of credit spreads using the t-test. We show that the systematic errors are affected by the current leverage ratio and asset volatility.

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Comparison of realized volatilities reflecting overnight returns (장외시간 수익률을 반영한 실현변동성 추정치들의 비교)

  • Cho, Soojin;Kim, Doyeon;Shin, Dong Wan
    • The Korean Journal of Applied Statistics
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    • v.29 no.1
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    • pp.85-98
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    • 2016
  • This study makes an empirical comparison of various realized volatilities (RVs) in terms of overnight returns. In financial asset markets, during overnight or holidays, no or few trading data are available causing a difficulty in computing RVs for a whole span of a day. A review will be made on several RVs reflecting overnight return variations. The comparison is made for forecast accuracies of several RVs for some financial assets: the US S&P500 index, the US NASDAQ index, the KOSPI (Korean Stock Price Index), and the foreign exchange rate of the Korea won relative to the US dollar. The RV of a day is compared with the square of the next day log-return, which is a proxy for the integrated volatility of the day. The comparison is made by investigating the Mean Absolute Error (MAE) and the Root Mean Square Error (RMSE). Statistical inference of MAE and RMSE is made by applying the model confidence set (MCS) approach and the Diebold-Mariano test. For the three index data, a specific RV emerges as the best one, which addresses overnight return variations by inflating daytime RV.

A Study On The Economic Value Of Firm's Big Data Technologies Introduction Using Real Option Approach - Based On YUYU Pharmaceuticals Case - (실물옵션 기법을 이용한 기업의 빅데이터 기술 도입의 경제적 가치 분석 - 유유제약 사례를 중심으로 -)

  • Jang, Hyuk Soo;Lee, Bong Gyou
    • Journal of Internet Computing and Services
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    • v.15 no.6
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    • pp.15-26
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    • 2014
  • This study focus on a economic value of the Big Data technologies by real options model using big data technology company's stock price to determine the price of the economic value of incremental assessed value. For estimating stochastic process of company's stock price by big data technology to extract the incremental shares, Generalized Moments Method (GMM) are used. Option value for Black-Scholes partial differential equation was derived, in which finite difference numerical methods to obtain the Big Data technology was introduced to estimate the economic value. As a result, a option value of big data technology investment is 38.5 billion under assumption which investment cost is 50 million won and time value is a about 1 million, respectively. Thus, introduction of big data technology to create a substantial effect on corporate profits, is valuable and there are an effects on the additional time value. Sensitivity analysis of lower underlying asset value appear decreased options value and the lower investment cost showed increased options value. A volatility are not sensitive on the option value due to the big data technological characteristics which are low stock volatility and introduction periods.

Gross Profitability Premium in the Korean Stock Market and Its Implication for the Fund Distribution Industry (한국 주식시장에서 총수익성 프리미엄에 관한 분석 및 펀드 유통산업에 주는 시사점)

  • Yoon, Bo-Hyun;Liu, Won-Suk
    • Journal of Distribution Science
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    • v.13 no.9
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    • pp.37-45
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    • 2015
  • Purpose - This paper's aim is to investigate whether or not gross profitability explains the cross-sectional variation of the stock returns in the Korean stock market. Gross profitability is an alternative profitability measure proposed by Novy-Marx in 2013 to predict cross-sectional variation of stock returns in the US. He shows that the gross profitability adds explanatory power to the Fama-French 3 factor model. Interestingly, gross profitability is negatively correlated with the book-to-market ratio. By confirming the gross profitability premium in the Korean stock market, we may provide some implications regarding the well-known value premium. In addition, our empirical results may provide opportunities for the fund distribution industry to promote brand new styles of funds. Research design, data, and methodology - For our empirical analysis, we collect monthly market prices of all the companies listed on the Korea Composite Stock Price Index (KOSPI) of the Korea Exchanges (KRX). Our sample period covers July1994 to December2014. The data from the company financial statementsare provided by the financial information company WISEfn. First, using Fama-Macbeth cross-sectional regression, we investigate the relation between gross profitability and stock return performance. For robustness in analyzing the performance of the gross profitability strategy, we consider value weighted portfolio returns as well as equally weighted portfolio returns. Next, using Fama-French 3 factor models, we examine whether or not the gross profitability strategy generates excess returns when firmsize and the book-to-market ratio are controlled. Finally, we analyze the effect of firm size and the book-to-market ratio on the gross profitability strategy. Results - First, through the Fama-MacBeth cross-sectional regression, we show that gross profitability has almost the same explanatory power as the book-to-market ratio in explaining the cross-sectional variation of the Korean stock market. Second, we find evidence that gross profitability is a statistically significant variable for explaining cross-sectional stock returns when the size and the value effect are controlled. Third, we show that gross profitability, which is positively correlated with stock returns and firm size, is negatively correlated with the book-to-market ratio. From the perspective of portfolio management, our results imply that since the gross profitability strategy is a distinctive growth strategy, value strategies can be improved by hedging with the gross profitability strategy. Conclusions - Our empirical results confirm the existence of a gross profitability premium in the Korean stock market. From the perspective of the fund distribution industry, the gross profitability portfolio is worthy of attention. Since the value strategy portfolio returns are negatively correlated with the gross profitability strategy portfolio returns, by mixing both portfolios, investors could be better off without additional risk. However, the profitable firms are dissimilar from the value firms (high book-to-market ratio firms); therefore, an alternative factor model including gross profitability may help us understand the economic implications of the well-known anomalies such as value premium, momentum, and low volatility. We reserve these topics for future research.

Smart Beta Strategies based on the Quality Indices (퀄리티 지수를 이용한 스마트 베타 전략)

  • Ohk, Ki Yool;Lee, Minkyu
    • Management & Information Systems Review
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    • v.37 no.4
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    • pp.63-74
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    • 2018
  • Recently, in the asset management industry, the smart beta strategy, which has an intermediate nature between passive and active strategies, is attracting attention. In this smart beta strategy, value, momentum, low volatility, and quality index are widely used. In this study, we analyzed the quality index which is not clear and complicated to calculate. According to the MSCI methodology, the quality index was calculated using three variables: return on equity, debt to equity, and earnings variability. In addition, we use the index using only return on equity variable, the index using only two variables of return on equity and debt to equity, and the KOSPI index as comparison targets for the quality index. In order to evaluate the performance of the indices used in the analysis, the arithmetic mean return, the coefficient of variation, and the geometric mean return were used. In addition, Fama and French (1993) model, which is widely used in related studies, was used as a pricing model to test whether abnormal returns in each index are occurring. The results of the empirical analysis are as follows. First, in all period analysis, quality index was the best in terms of holding period returns. Second, the quality index performed best in the currency crisis and the global financial crisis. Third, abnormal returns were not found in all indices before the global financial crisis. Fourth, in the period after the global financial crisis, the quality index has the highest abnormal return.

A Study on the Efficiency of KTB Forward Markets (국채선도금리(Forward rate)의 효율성(Efficiency)에 관한 연구)

  • Moon, Gyu-Hyun;Hong, Chung-Hyo
    • The Korean Journal of Financial Management
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    • v.22 no.2
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    • pp.189-212
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    • 2005
  • This study examines the interactions between KTB spot and futures markets using the daily prices from March 4, 2002 to January 31, 2005. We use Granger causality test, impulse Response Analysis and Variance Decomposition through vector autoregressive analysis (VAR). However, considering the long-term relationships between the level variables of KTB spot and futures, we introduced Vector Error Correction Model. The main results are as follows. According to the results of Granger-causality test and impulse response analysis, we find that the yields of KTB forward have a great influence on the change of KTB spot but not vice versa. In terms of volatility analysis, there is no inter-dependence between KTB forward and spot markets. In the variance decomposition analysis we find that the short-term KTB forward has much more impact on the KTB spot market than the long-term KTB forward does. We think these results are meaningful for bond investors who are in charge of capital asset pricing valuation, risk management and international portfolio management.

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The Price-discovery of Korean Bond Markets by US Treasury Bond Markets by US Treasury Bond Markets - The Start-up of Korean Bond Valuation System - (한국 채권현물시장에 대한 미국 채권현물시장의 가격발견기능 연구 - 채권시가평가제도 도입 전후를 중심으로 -)

  • Hong, Chung-Hyo;Moon, Gyu-Hyun
    • The Korean Journal of Financial Management
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    • v.21 no.2
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    • pp.125-151
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    • 2004
  • This study tests the price discovery from US Treasury bond markets to Korean bond markets using the daily returns of Korean bond data (CD, 3-year T-note, 5-year T-note, 5-year corporate note) and US treasury bond markets (3-month T-bill, 5-year T-note 10-year T-bond) from July 1, 1998 to December 31, 2003. For further research, we divide full data into two sub-samples on the basis of the start-up of bond valuation system in Korean bond market July 1, 2000, employing uni-variate AR(1)-GARCH(1,1)-M model. The main results are as follows. First the volatility spillover effects from US Treasury bond markets (3-month T-bill, 5-year T-note, 10-year T-bond) to Korean Treasury and Corporate bond markets (CD, 3-year T-note, 5-year T-note, 5-year corporate note) are significantly found at 1% confidence level. Second, the price discovery function from US bond markets to Korean bond markets in the sub-data of the pre-bond valuation system exists much stronger and more persistent than those of the post-bond valuation system. In particular, the role of 10-year T-bond compared with 3-month T-bill and 5-year T-note is outstanding. We imply these findings result from the international capital market integration which is accelerated by the broad opening of Korean capital market after 1997 Korean currency crisis and the development of telecommunication skill. In addition, these results are meaningful for bond investors who are in charge of capital asset pricing valuation, risk management, and international portfolio management.

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A Study on the Prediction Model of Stock Price Index Trend based on GA-MSVM that Simultaneously Optimizes Feature and Instance Selection (입력변수 및 학습사례 선정을 동시에 최적화하는 GA-MSVM 기반 주가지수 추세 예측 모형에 관한 연구)

  • Lee, Jong-sik;Ahn, Hyunchul
    • Journal of Intelligence and Information Systems
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    • v.23 no.4
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    • pp.147-168
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    • 2017
  • There have been many studies on accurate stock market forecasting in academia for a long time, and now there are also various forecasting models using various techniques. Recently, many attempts have been made to predict the stock index using various machine learning methods including Deep Learning. Although the fundamental analysis and the technical analysis method are used for the analysis of the traditional stock investment transaction, the technical analysis method is more useful for the application of the short-term transaction prediction or statistical and mathematical techniques. Most of the studies that have been conducted using these technical indicators have studied the model of predicting stock prices by binary classification - rising or falling - of stock market fluctuations in the future market (usually next trading day). However, it is also true that this binary classification has many unfavorable aspects in predicting trends, identifying trading signals, or signaling portfolio rebalancing. In this study, we try to predict the stock index by expanding the stock index trend (upward trend, boxed, downward trend) to the multiple classification system in the existing binary index method. In order to solve this multi-classification problem, a technique such as Multinomial Logistic Regression Analysis (MLOGIT), Multiple Discriminant Analysis (MDA) or Artificial Neural Networks (ANN) we propose an optimization model using Genetic Algorithm as a wrapper for improving the performance of this model using Multi-classification Support Vector Machines (MSVM), which has proved to be superior in prediction performance. In particular, the proposed model named GA-MSVM is designed to maximize model performance by optimizing not only the kernel function parameters of MSVM, but also the optimal selection of input variables (feature selection) as well as instance selection. In order to verify the performance of the proposed model, we applied the proposed method to the real data. The results show that the proposed method is more effective than the conventional multivariate SVM, which has been known to show the best prediction performance up to now, as well as existing artificial intelligence / data mining techniques such as MDA, MLOGIT, CBR, and it is confirmed that the prediction performance is better than this. Especially, it has been confirmed that the 'instance selection' plays a very important role in predicting the stock index trend, and it is confirmed that the improvement effect of the model is more important than other factors. To verify the usefulness of GA-MSVM, we applied it to Korea's real KOSPI200 stock index trend forecast. Our research is primarily aimed at predicting trend segments to capture signal acquisition or short-term trend transition points. The experimental data set includes technical indicators such as the price and volatility index (2004 ~ 2017) and macroeconomic data (interest rate, exchange rate, S&P 500, etc.) of KOSPI200 stock index in Korea. Using a variety of statistical methods including one-way ANOVA and stepwise MDA, 15 indicators were selected as candidate independent variables. The dependent variable, trend classification, was classified into three states: 1 (upward trend), 0 (boxed), and -1 (downward trend). 70% of the total data for each class was used for training and the remaining 30% was used for verifying. To verify the performance of the proposed model, several comparative model experiments such as MDA, MLOGIT, CBR, ANN and MSVM were conducted. MSVM has adopted the One-Against-One (OAO) approach, which is known as the most accurate approach among the various MSVM approaches. Although there are some limitations, the final experimental results demonstrate that the proposed model, GA-MSVM, performs at a significantly higher level than all comparative models.