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A censored-GARCH model of asset returns with price limits

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  • WEI, Steven X.

    ()
    (Center for Operations Research and Econometrics (CORE), Université catholique de Louvain (UCL), Louvain la Neuve, Belgium and Department of Finance, The Hong Kong University of Science and Technology)

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    Abstract

    As one important form of market circuit breakers, price limits have been often imposed in stock and futures markets. This paper considers modeling the return process of such assets, focusing on the treatment of price limits. As a result, a censored-GARCH model is formulated and a Bayesian approach to this model is developed. An application is provided to Treasury bill futures over a period of high volatility and frequent limit moves. The impacts of price limits are demonstrated with the real data and confirmed with a simulation example

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    Bibliographic Info

    Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 1998015.

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    Date of creation: 00 Feb 1998
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    Handle: RePEc:cor:louvco:1998015

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    Related research

    Keywords: Price limits; censored-GARCH model; griddy Gibbs sampler-data augmentation.;

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    Cited by:
    1. Ewa Majerowska, . "Validity of the optimal portfolio allocation model with price constraints on the example of the Warsaw Stock Exchange," Discussion Papers in European Economics 99/5, Department of Economics, University of Leicester.

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