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Empirical Evidence of Jump Behavior in the Colombian Bond Market.

Authors :
Romero Díaz, Nicolás
Castro Iragorri, Carlos Alberto
Vélez Hernández, Sebastián
Source :
ODEON - Observatorio de Economía y Operaciones Numéricas. ene-jun2023, Issue 24, p119-147. 29p.
Publication Year :
2023

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. [ABSTRACT FROM AUTHOR]

Details

Language :
English
ISSN :
17941113
Issue :
24
Database :
Academic Search Index
Journal :
ODEON - Observatorio de Economía y Operaciones Numéricas
Publication Type :
Academic Journal
Accession number :
174177775
Full Text :
https://doi.org/10.18601/17941113.n24.07