A0154
Title: Intraday range-based stochastic volatility models with application to the Japanese stock index
Authors: Toshiaki Watanabe - Hitotsubashi University (Japan) [presenting]
Jouchi Nakajima - Bank of Japan (Japan)
Abstract: Realized stochastic volatility (RSV) models, where the true volatility is modelled jointly with a realized measure (RM) of volatility taking account of the bias in the RM, are extended for the analysis of high-frequency intraday volatility. The proposed model consists of the persistent autoregressive stochastic volatility process, seasonal components of the intraday volatility patterns, and correlated jumps in prices and volatilities. The range of the logarithmic prices within each intraday time interval is used as a RM in the proposed model. A Bayesian method for the analysis of this model is developed using Markov chain Monte Carlo (MCMC) with the exact multi-move sampler for the SV process. Using this method, the proposed model is applied to the 5-minute returns of Nikkei 225 index. It is also examined whether the intraday range-based RSV model improves the predictive ability of volatility compared with the intraday SV model without the range information and commonly-used models for daily realized volatility.
