This paper proposes a latent dynamic factor model for low- as well as high-dimensional realized covariance matrices of stock returns. The approach is based on the matrix logarithm and allows for flexible dynamic dependence patterns by combining common latent factors driven by HAR dynamics and...

We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

The aim of this paper is to present novel tests for the early causal diagnostic of positive and negative bubbles in the S&P 500 index and the detection of End-of-Bubble signals with their corresponding confidence levels. We use monthly S&P 500 data covering the period from August 1791 to August...

Based on recent evidence of fractional cointegration in commodity spot and futures markets, we investigate whether a fractionally cointegrated model can provide statistically and/or economically significant forecasts of commodity returns. Specifically, we propose to model and forecast commodity...

Bid and ask sizes at the top of the order book provide information on short-term price moves. Drawing from classical descriptions of the order book in terms of queues and order-arrival rates (Smith et al (2003)), we consider a diffusion model for the evolution of the best bid/ask queues. We...

In this paper, an attempt has been made to model the volatility of NIFTY index of National Stock Exchange (NSE) and forecast the NIFTY stock returns for short term by using daily data ranging from January, 2000, to December, 2014, which comprises 3736 data points for the analysis by using...

Several novel large volatility matrix estimation methods have been developed based on the high-frequency financial data. They often employ the approximate factor model that leads to a low-rank plus sparse structure for the integrated volatility matrix and facilitates estimation of large...

We investigate the direct connection between the uncertainty related to estimated stable ratios of stock prices and risk and return of two pairs trading strategies: a conditional statistical arbitrage method and an implicit arbitrage one. A simulation-based Bayesian procedure is introduced for...

This paper compares different GARCH models in terms of their out-of-sample predictive ability of leveraged loan market volatility. The study investigates whether the asymmetric effects of good and bad news on volatility is present and how distributional assumptions affect the selection of GARCH...