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Financial Risk Measurement for Financial Risk Management

Andersen, Torben G.; Bollerslev, Tim; Christoffersen, … - School of Economics and Management, University of Aarhus - 2011

Current practice largely follows restrictive approaches to market risk measurement, such as historical simulation or RiskMetrics. In contrast, we propose exible methods that exploit recent developments in nancial econometrics and are likely to produce more accurate risk assessments, treating...

Persistent link: https://www.econbiz.de/10009371457

Nonparametric Filtering of the Realised Spot Volatility: A Kernel-based Approach

Kristensen, Dennis - School of Economics and Management, University of Aarhus - 2007

A kernel weighted version of the standard realised integrated volatility es- timator is proposed. By different choices of the kernel and bandwidth, the measure allows us to focus on specific characteristics of the volatility process. In particular, as the bandwidth vanishes, an estimator of the...

Persistent link: https://www.econbiz.de/10005198857

The Fine Structure of Equity-Index Option Dynamics

Andersen, Torben G.; Bondarenko, Oleg; Todorov, Viktor; … - School of Economics and Management, University of Aarhus - 2013

We analyze the high-frequency dynamics of S&P 500 equity-index option prices by constructing an assortment of implied volatility measures. This allows us to infer the underlying fine structure behind the innovations in the latent state variables driving the movements of the volatility surface....

Persistent link: https://www.econbiz.de/10010851229

Estimating Stochastic Volatility Models using Prediction-based Estimating Functions

Lunde, Asger; Brix, Anne Floor - School of Economics and Management, University of Aarhus - 2013

In this paper prediction-based estimating functions (PBEFs), introduced in Sørensen (2000), are reviewed and PBEFs for the Heston (1993) stochastic volatility model are derived. The finite sample performance of the PBEF based estimator is investigated in a Monte Carlo study, and compared to the...

Persistent link: https://www.econbiz.de/10010851259

Bootstrapping integrated covariance matrix estimators in noisy jump-diffusion models with non-synchronous trading

Hounyo, Ulrich - School of Economics and Management, University of Aarhus - 2014

We propose a bootstrap method for estimating the distribution (and functionals of it such as the variance) of various integrated covariance matrix estimators. In particular, we first adapt the wild blocks of blocks bootstrap method suggested for the pre-averaged realized volatility estimator to...

Persistent link: https://www.econbiz.de/10010937808

Modeling and Forecasting the Distribution of Energy Forward Returns - Evidence from the Nordic Power Exchange

Lunde, Asger; Olesen, Kasper V. - School of Economics and Management, University of Aarhus - 2014

analyze empirical results for a selection of existing realized measures of volatility and incorporate them in a Realized GARCH … documented, which motivates the use of a flexible and robust methodology such as the Realized GARCH. Within this framework …-of-sample results for the Realized GARCH forecasts suggest a limited added value from using “traditional” realized volatility measures …

Persistent link: https://www.econbiz.de/10010945126

Asymptotic theory of range-based multipower variation

Christensen, Kim; Podolskij, Mark - School of Economics and Management, University of Aarhus - 2011

In this paper, we present a realised range-based multipower variation theory, which can be used to estimate return variation and draw jump-robust inference about the diffusive volatility component, when a high-frequency record of asset prices is available. The standard range-statistic –...

Persistent link: https://www.econbiz.de/10009385750

Risk and Return: Long-Run Relationships, Fractional Cointegration, and Return Predictability

Bollerslev, Tim; Osterrieder, Daniela; Sizova, Natalia; … - School of Economics and Management, University of Aarhus - 2011

The dynamic dependencies in financial market volatility are generally well described by a long-memory fractionally integrated process. At the same time, the volatility risk premium, defined as the difference between the ex-post realized volatility and the market’s ex-ante expectation thereof,...

Persistent link: https://www.econbiz.de/10009399368

Jump-Robust Volatility Estimation using Nearest Neighbor Truncation

Andersen, Torben G.; Dobrev, Dobrislav; Schaumburg, Ernst - School of Economics and Management, University of Aarhus - 2009

We propose two new jump-robust estimators of integrated variance based on highfrequency return observations. These MinRV and MedRV estimators provide an attractive alternative to the prevailing bipower and multipower variation measures. Specifically, the MedRV estimator has better theoretical...

Persistent link: https://www.econbiz.de/10008472103

Tails, Fears and Risk Premia

Bollerslev, Tim; Todorov, Viktor - School of Economics and Management, University of Aarhus - 2009

We show that the compensation for rare events accounts for a large fraction of the equity and variance risk premia in the S&P 500 market index. The probability of rare events vary significantly over time, increasing in periods of high market volatility, but the risk premium for tail events...

Persistent link: https://www.econbiz.de/10004980201