• Title/Summary/Keyword: volatility with non-zero origin

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Asymmetric volatility models with non-zero origin shifted from zero : Proposal and application (원점이 이동한 비대칭-변동성 모형의 제안 및 응용)

  • Ye Jin Lee;Sun Young Hwang;Sung Duck Lee
    • The Korean Journal of Applied Statistics
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    • v.36 no.6
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    • pp.561-571
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    • 2023
  • Volatility of a time series is defined as the conditional variance on the past information. In particular, for financial time series, volatility is regarded as a time-varying measure of risk for the financial series. To capture the intrinsic asymmetry in the risk of financial series, various asymmetric volatility processes including threshold-ARCH (TARCH, for short) have been proposed in the literature (see, for instance, Choi et al., 2012). This paper proposes a volatility function featuring non-zero origin in which the origin of the volatility is shifted from the zero and therefore the resulting volatility function is certainly asymmetric around zero and achieves the minimum at a non-zero (rather than zero) point. To validate the proposed volatility function, we analyze the Korea stock prices index (KOSPI) time series during the Covid-19 pandemic period for which origin shift to the left of the zero in volatility is shown to be apparent using the minimum AIC as well as via parametric bootstrap verification.