workingPaper
Empirical evidence of jump behaviour in the Colombian intraday bond market
Fecha
2020-04-03Registro en:
Romero Díaz, Nicolás; Castro-Iragorri, Carlos; Velez Hernandez, Sebastian (2020) Empirical evidence of jump behaviour in the Colombian intraday bond market. Universidad del Rosario, Department of Economics, Documentos de trabajo economía. 24 pp.
Autor
Velez Hernandez, Sebastian
Romero Díaz, Nicolás
Castro, Carlos
Institución
Resumen
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 in order 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 or the US.