Expansion Of The Asv Model And Its Application In China's Financial Markets

Volatility of financial data has always been one of the hot topics of Economics. A large body of research suggests that volatility in financial market is time varying. In order to describe the time varying of volatility, two classes models——autoregressive conditional heteroskedasiticity (ARCH) model and stochastic volatility (SV) model were proposed. The main research objects of this dissertation focus on the latter.An important and well documented empirical feature in many financial time series is the financial leverage effect. Motivated by this empirical evidence, the asymmetric SV model is chosen as the basic model to reflect the leverage effect in this paper. In Econometric, a dummy variable is to indicate the absence or presence of some categorical effect that may be expected to shift the outcome. In order to enlarge the application of ASV model in economy and finance, a new model based on ASV is proposed, which is an ASV model with dummy variable.The applications of the models are necessarily involved in their estimation; people have constructed many estimation methods of SV model, the most popular one is Markov chain Monte Carlo (MCMC) method. Based on the characteristics of both the MCMC method and the ASV model with dummy variable, the paper firstly studies the model's statistical structure, chooses the parameter's prior distribution, and designs a Markov chain Monte Carlo algorithm procedure with Gibbs sampler to carry out simulation analysis.ASV model with a dummy variable is for the analysis of the changes of Hang Seng Stock index in volatility after introduction of Hang Seng Stock index futures. To do comparative analysis of the ASV model with a dummy variable and GARCH model, MCMC method is chosen as the estimation method for GARCH model. Compared by DIC criterion, we obtain that ASV model with a dummy variable is superior to GARCH model. Meanwhile, the estimations of the parameters indicate that the introduction of Hang Seng Stock index futures has little impact on the volatility of the spot market.