Estimating stochastic volatility diffusion using conditional moments of integrated volatility

We exploit the distributional information contained in high-frequency intraday data in constructing a simple conditional moment estimator for stochastic volatility diffusions. The estimator is based on the analytical solutions of the first two conditional moments for the latent integrated volatility, the realization of which is effectively approximated by the sum of the squared high-frequency increments of the process. Our simulation evidence indicates that the resulting GMM estimator is highly reliable and accurate. Our empirical implementation based on high-frequency five-minute foreign exchange returns suggests the presence of multiple latent stochastic volatility factors and possible jumps. © 2002 Elsevier Science B.V. All rights reserved.

Effect of different jump distributions on the dynamics of jump processes

The paper investigates stochastic processes forced by independent and identically distributed jumps occurring according to a Poisson process. The impact of different distributions of the jump amplitudes are analyzed for processes with linear drift. Exact expressions of the probability density functions are derived when jump amplitudes are distributed as exponential, gamma, and mixture of exponential distributions for both natural and reflecting boundary conditions. The mean level-crossing properties are studied in relation to the different jump amplitudes. As an example of application of the previous theoretical derivations, the role of different rainfall-depth distributions on an existing stochastic soil water balance model is analyzed. It is shown how the shape of distribution of daily rainfall depths plays a more relevant role on the soil moisture probability distribution as the rainfall frequency decreases, as predicted by future climatic scenarios. © 2010 The American Physical Society.

Exploring the effects of image persistence in low frame rate virtual environments

© 2015 IEEE.In virtual reality applications, there is an aim to provide real time graphics which run at high refresh rates. However, there are many situations in which this is not possible due to simulation or rendering issues. When running at low frame rates, several aspects of the user experience are affected. For example, each frame is displayed for an extended period of time, causing a high persistence image artifact. The effect of this artifact is that movement may lose continuity, and the image jumps from one frame to another. In this paper, we discuss our initial exploration of the effects of high persistence frames caused by low refresh rates and compare it to high frame rates and to a technique we developed to mitigate the effects of low frame rates. In this technique, the low frame rate simulation images are displayed with low persistence by blanking out the display during the extra time such image would be displayed. In order to isolate the visual effects, we constructed a simulator for low and high persistence displays that does not affect input latency. A controlled user study comparing the three conditions for the tasks of 3D selection and navigation was conducted. Results indicate that the low persistence display technique may not negatively impact user experience or performance as compared to the high persistence case. Directions for future work on the use of low persistence displays for low frame rate situations are discussed.

Measuring Tail Risks at High Frequency

I develop a new methodology for measuring tail risks using the cross section of bid-ask spreads. Market makers embed tail risk information into spreads because (1) they lose to arbitrageurs when changes to asset values exceed the cost of liquidity and (2) underlying price movements and potential costs are linear in factor loadings. Using this insight, simple cross-sectional regressions relating spreads and trading volume to factor betas can recover tail risks in real time for priced or non-priced return factors. The methodology disentangles financial and aggregate market risks during the 2007-2008 Financial Crisis; anticipates jump risks associated with Federal Open Market Committee announcements; and quantifies a sharp, temporary increase in market tail risk before and throughout the 2010 Flash Crash. The recovered time series of implied market risks also aligns closely with both realized market jumps and the VIX.