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A Markov Chain Estimator of Multivariate Volatility from High Frequency Data

Hansen, Peter Reinhard; Horel, Guillaume; Lunde, Asger; … - School of Economics and Management, University of Aarhus - 2015

We introduce a multivariate estimator of financial volatility that is based on the theory of Markov chains. The Markov …

Persistent link: https://www.econbiz.de/10011268024

A Martingale Decomposition of Discrete Markov Chains

Hansen, Peter Reinhard - School of Economics and Management, University of Aarhus - 2015

We consider a multivariate time series whose increments are given from a homogeneous Markov chain. We show that the martingale component of this process can be extracted by a filtering method and establish the corresponding martingale decomposition in closed-form. This representation is useful...

Persistent link: https://www.econbiz.de/10011268025

Quadratic Variation by Markov Chains

Hansen, Peter Reinhard; Horel, Guillaume - School of Economics and Management, University of Aarhus - 2009

We introduce a novel estimator of the quadratic variation that is based on the theory of Markov chains. The estimator is motivated by some general results concerning filtering contaminated semimartingales. Specifically, we show that filtering can in principle remove the effects of market...

Persistent link: https://www.econbiz.de/10004990847

Volatility Components, Affine Restrictions and Non-Normal Innovations

Christoffersen, Peter; Dorion, Kris; Wang, Yintian - School of Economics and Management, University of Aarhus - 2008

Recent work by Engle and Lee (1999) shows that allowing for long-run and short-run components greatly enhances a GARCH model’s ability fit daily equity return dynamics. Using the risk-neutralization in Duan (1995), we assess the option valuation performance of the Engle-Lee model and compare...

Persistent link: https://www.econbiz.de/10005440037

Assessing Relative Volatility/Intermittency/Energy Dissipation

Barndorff-Nielsen, Ole E.; Pakkanen, Mikko S.; … - School of Economics and Management, University of Aarhus - 2013

We introduce the notion of relative volatility/intermittency and demonstrate how relative volatility statistics can be … used to estimate consistently the temporal variation of volatility/intermittency even when the data of interest are … Ito semimartingales and discuss how it can be used for inference on relative volatility/intermittency. …

Persistent link: https://www.econbiz.de/10010851213

Rare Disasters and Credit Market Puzzles

Christoffersen, Peter; Du, Du; Elkamhi, Redouane - School of Economics and Management, University of Aarhus - 2013

empirical regularities in credit markets. Our model captures the empirical level and volatility of credit spreads, generates a …

Persistent link: https://www.econbiz.de/10010851248

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 … framework for the joint modeling of returns and realized measures of volatility. An influential bias in these measures is … over time, which stresses the importance of careful modeling and forecasting of volatility. We show that improved model fit …

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

Multipower Variation for Brownian Semistationary Processes

Barndorff-Nielsen, Ole E.; Corcuera, José Manuel; … - School of Economics and Management, University of Aarhus - 2009

In this paper we study the asymptotic behaviour of power and multipower variations of stochastic processes. Processes of the type considered serve in particular, to analyse data of velocity increments of a fluid in a turbulence regime with spot intermittency sigma. The purpose of the present...

Persistent link: https://www.econbiz.de/10004991540

Evaluating Value-at-Risk Models with Desk-Level Data

Christoffersen, Peter; Berkowitz, Jeremy; Pelletier, Denis - School of Economics and Management, University of Aarhus - 2008

We present new evidence on disaggregated profit and loss (P/L) and Value-at-Risk (VaR) forecasts obtained from a large international commercial bank. Our dataset includes the actual daily P/L generated by four separate business lines within the bank. All four business lines are involved in...

Persistent link: https://www.econbiz.de/10005037434

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