Skip to main content

LUP Student Papers

LUND UNIVERSITY LIBRARIES

Optimal dynamic asset allocation using a non-linear discrete time liquidity driven microstructure market model and extended Kalman filtering

Strömberg, Anders (2006)
Department of Economics
Abstract
This paper use a discrete time microstructure model which considers excess demand and market liquidity as two unobservable state variables as determinants whether the market is overvalued or undervalued. The model expresses the variation of conditional variance of price, were the amplitude of the price changes is dependent on the liquidity of the market. It is shown that the filtered process of hidden excess demand and its liquidity is meaningful to apply in an asset allocation strategy and is efficient in terms of producing a residual money gain compared to a passive strategy.
Please use this url to cite or link to this publication:
author
Strömberg, Anders
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
trading, extended kalman filter, non-linear dynamics, microstructure, dynamic optimization, discrete time, asset allocation, financial markets, financial economics, control theory, Economics, econometrics, economic theory, economic systems, economic policy, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik
language
English
id
1334948
date added to LUP
2006-02-06 00:00:00
date last changed
2010-08-03 10:49:03
@misc{1334948,
  abstract     = {{This paper use a discrete time microstructure model which considers excess demand and market liquidity as two unobservable state variables as determinants whether the market is overvalued or undervalued. The model expresses the variation of conditional variance of price, were the amplitude of the price changes is dependent on the liquidity of the market. It is shown that the filtered process of hidden excess demand and its liquidity is meaningful to apply in an asset allocation strategy and is efficient in terms of producing a residual money gain compared to a passive strategy.}},
  author       = {{Strömberg, Anders}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{Optimal dynamic asset allocation using a non-linear discrete time liquidity driven microstructure market model and extended Kalman filtering}},
  year         = {{2006}},
}