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Monte Carlo Methods and Applications

Managing Editor: Sabelfeld, Karl K.

Editorial Board: Binder, Kurt / Bouleau, Nicolas / Chorin, Alexandre J. / Dimov, Ivan / Dubus, Alain / Egorov, Alexander D. / Ermakov, Sergei M. / Halton, John H. / Heinrich, Stefan / Kalos, Malvin H. / Lepingle, D. / Makarov, Roman / Mascagni, Michael / Mathe, Peter / Niederreiter, Harald / Platen, Eckhard / Sawford, Brian R. / Schmid, Wolfgang Ch. / Schoenmakers, John / Simonov, Nikolai A. / Sobol, Ilya M. / Spanier, Jerry / Talay, Denis

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CiteScore 2017: 0.67

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1569-3961
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Volume 18, Issue 1

Issues

The identification of price jumps

Jan Hanousek / Evžen Kočenda / Jan Novotný
Published Online: 2012-02-29 | DOI: https://doi.org/10.1515/mcma-2011-0019

Abstract.

We performed an extensive simulation study to compare the relative performance of many price-jump indicators with respect to false positive and false negative probabilities. We simulated twenty different time series specifications with different intraday noise volatility patterns and price-jump specifications. The double McNemar non-parametric test (Psychometrika 12 (1947), 153–157) has been applied on constructed artificial time series to compare fourteen different price-jump indicators that are widely used in the literature. The results suggest large differences in terms of performance among the indicators, but we were able to identify the best-performing indicators. In the case of false positive probability, the best-performing price-jump indicator is based on thresholding with respect to centiles. In the case of false negative probability, the best indicator is based on bipower variation.

Keywords.: Price jumps; price-jump indicators; non-parametric testing; Monte Carlo simulations; financial econometrics

About the article

Received: 2011-05-03

Accepted: 2011-12-16

Published Online: 2012-02-29

Published in Print: 2012-03-01


Citation Information: Monte Carlo Methods and Applications, Volume 18, Issue 1, Pages 53–77, ISSN (Online) 1569-3961, ISSN (Print) 0929-9629, DOI: https://doi.org/10.1515/mcma-2011-0019.

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[3]
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[4]
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