Stub according to a course project for MS&E 349

Lorenzo Limonta, Department of Aeronautics & Astronautics

Jiacheng Zou, Department of Management Sciences & Engineering

Two topics are discussed in this project:

1. High-dimensional PCA for modern linear asset pricing. Discussions on how to statistically determine the number of significant factors given training set. Methods implemented:

• Bai and Ng, 2002;
• Ahn and Horenstein, 2013;
• Onatski, 2010;

2. High-frequency statistics and jump estimating. Implemented a jump test statistic using local volatility, e.g. 1-day volatility on 5-minute training set for weekly volatility mapping, using the methods summarised by Christensen et al., 2014.

For results, please go directly to visualization folder.