Volatilities, traded volumes, and the hypothesis of price increments in derivative securities

Lim, Gyuchang, Kim, Soo Yong, Scalas, Enrico and Kim, Kyungsik (2007) Volatilities, traded volumes, and the hypothesis of price increments in derivative securities. Physica A: Statistical Mechanics and its Applications, 382 (2). pp. 577-585. ISSN 0378-4371

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A detrended fluctuation analysis (DFA) is applied to the statistics of Korean treasury bond (KTB) futures from which the logarithmic increments, volatilities, and traded volumes are estimated over a specific time lag. In this study, the logarithmic increment of futures prices has no long-memory property, while the volatility and the traded volume exhibit the existence of the long-memory property. To analyze and calculate whether the volatility clustering is due to a inherent higher-order correlation not detected by with the direct application of the DFA to logarithmic increments of KTB futures, it is of importance to shuffle the original tick data of future prices and to generate a geometric Brownian random walk with the same mean and standard deviation. It was found from a comparison of the three tick data that the higher-order correlation inherent in logarithmic increments leads to volatility clustering. Particularly, the result of the DFA on volatilities and traded volumes can be supported by the hypothesis of price changes.

Item Type: Article
Schools and Departments: School of Mathematical and Physical Sciences > Mathematics
Subjects: Q Science > QA Mathematics > QA0276 Mathematical statistics
Depositing User: Enrico Scalas
Date Deposited: 30 Sep 2014 13:55
Last Modified: 30 Sep 2014 13:55
URI: http://sro.sussex.ac.uk/id/eprint/50273
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