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- Title
Empirical Evidence of Jump Behavior in the Colombian Bond Market.
- Authors
Romero Díaz, Nicolás; Castro Iragorri, Carlos Alberto; Vélez Hernández, Sebastián
- Abstract
Simulations and empirical studies suggest that incorporating a discontinuous jump process in asset pricing models improve volatility forecasting, pricing of instruments, and hedging positions in a portfolio. In this paper we analyze high frequency market data of Colombian sovereign bonds to study the presence or absence of discontinuities in the price generating process. We find that Colombian sovereign debt experiments jumps across all maturities but with different frequencies, in particular, we do not find that long term bonds jump less frequently than short term bonds. Furthermore, bonds with closer maturities cojump in greater magnitude than those with a greater distance between them. Finally, we find significant day-of-the-week effects, as well as an important increase in the jump frequency due to surprises in economic information related to US monetary policy, and no effect due to direct monetary policy announcements in Colombia.
- Subjects
COLOMBIA; BOND market; BONDS (Finance); HEDGING (Finance); PUBLIC debts; JUMP processes; BOND prices; MONETARY policy
- Publication
ODEON - Observatorio de Economía y Operaciones Numéricas, 2023, Issue 24, p119
- ISSN
1794-1113
- Publication type
Article
- DOI
10.18601/17941113.n24.07