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Large-volatility dynamics in financial markets

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  • X. F. Jiang
  • B. Zheng
  • J. Shen

Abstract

We investigate the large-volatility dynamics in financial markets, based on the minute-to-minute and daily data of the Chinese Indices and German DAX. The dynamic relaxation both before and after large volatilities is characterized by a power law, and the exponents $p_\pm$ usually vary with the strength of the large volatilities. The large-volatility dynamics is time-reversal symmetric at the time scale in minutes, while asymmetric at the daily time scale. Careful analysis reveals that the time-reversal asymmetry is mainly induced by exogenous events. It is also the exogenous events which drive the financial dynamics to a non-stationary state. Different characteristics of the Chinese and German stock markets are uncovered.

Suggested Citation

  • X. F. Jiang & B. Zheng & J. Shen, 2010. "Large-volatility dynamics in financial markets," Papers 1002.3747, arXiv.org, revised Mar 2011.
    • Handle: RePEc:arx:papers:1002.3747
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    1. Bouchaud,Jean-Philippe & Potters,Marc, 2003. "Theory of Financial Risk and Derivative Pricing," Cambridge Books, Cambridge University Press, number 9780521819169.
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