Bayesian Stochastic Volatility Model In Finance Analysis Based On MCMC Simulation

The economical or the finance time series have the universal phenomenon of volatility, but the volatility is a core research question which to describe a money market. In 1986 Taylor proposed the stochastic volatility model described volatility. In recent years the stochastic volatility model develops very fast in our country, the researcher proposed the lots of expanding model, for example heavy-tail SV model, SV model in mean and so on. But the quality of expanding model for simulating the finance time series does not have a conclusion. This article introduces the DIC criterion, using the Bayesian's theorem, to compare the SV model system.The SV-N model, the SV-T model, the SV-GED model, the SV-MN model and the SV-MT model in the SV model system were analyzed according to the Bayesian theorem. Drawing on the experience of the parameters'priors distribution abroad. A Markov chain Monte Carlo algorithm procedure with Gibbs sampler was designed to estimate the models'parameter through the WinBUGS software. Shanghai Stock market was analyzed through Bayesian estimated value of the parameter compared to Shenzhen Stock market. After the comparative analysis we discovery Shanghai Stock market and Shenzhen Stock market all display the property of strong volatility persistence. But Shanghai Stock market has the stronger volatility persistence compared to Shenzhen Stock market. The Shanghai Stock market's noise must be more compared to Shenzhen Stock market. But the Shenzhen Stock market's volatility level must be bigger than Shanghai Stock market, the risk is also higher.The Shanghai Stock market was analyzed using the DIC compared to Shenzhen Stock market under the SV models system. The analysis discovered SV-MT model more profoundly descripts the volatility level, the property of volatility clusting and the leptokurtic of our country Stock market. The best model to simulate the volatility of Shenzhen Stock market is the SV-GED model, but the SV-MN model is simulating badly. The best model to simulate the volatility of shanghai Stock market is the SV-T model, but the SV-MN model is simulating badly. Therefore, we may draw the conclusion, our country Stock market's returns ratio existence obvious leptokurtic phenomenon. We should use the heavy-tail SV model to carry on the analysis to the volatility of our country Stock market.