Unified Discrete-Time Factor Stochastic Volatility and Continuous-Time Ito Models for Combining Inference Based on Low-Frequency and High-Frequency

• Tác giả: Donggyu Kim, Xinyu Song, Yazhen Wang
• Ngôn ngữ: eng
• Ký hiệu phân loại: 003.76 Stochastic systems
• Thông tin xuất bản: 2020
• Bộ sưu tập: Metadata
• ID: 164705

Tóm tắt

This paper introduces unified models for high-dimensional factor-based Ito process, which can accommodate both continuous-time Ito diffusion and discrete-time stochastic volatility (SV) models by embedding the discrete SV model in the continuous instantaneous factor volatility process. We call it the SV-Ito model. Based on the series of daily integrated factor volatility matrix estimators, we propose quasi-maximum likelihood and least squares estimation methods. Their asymptotic properties are established. We apply the proposed method to predict future vast volatility matrix whose asymptotic behaviors are studied. A simulation study is conducted to check the finite sample performance of the proposed estimation and prediction method. An empirical analysis is carried out to demonstrate the advantage of the SV-Ito model in volatility prediction and portfolio allocation problems.