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...

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...

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 –...

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,...

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...

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...

We propose a new test for the parametric form of the volatility function in continuous time diffusion models of the type dXt = a(t,Xt)dt + s(t,Xt)dWt. Our approach involves a range-based estimation of the integrated volatility and the integrated quarticity, which are used to construct the test...

We consider a new class of estimators for volatility functionals in the setting of frequently observed Itô diffusions which are disturbed by i.i.d. noise. These statistics extend the approach of pre-averaging as a general method for the estimation of the integrated volatility in the presence of...

Using a unique high-frequency futures dataset, we characterize the response of U.S., German and British stock, bond and foreign exchange markets to real-time U.S. macroeconomic news. We find that news produces conditional mean jumps, hence high-frequency stock, bond and exchange rate dynamics...

This paper introduces a new estimator to measure the ex-post covariation between high-frequency financial time series under market microstructure noise. We provide an asymptotic limit theory (including feasible central limit theorems) for standard methods such as regression, correlation analysis...