Statistical Modeling of Asymetric Risk in Asset Returns
AbstractThe purpose of this article is to provide a straightforward model for asset returns which captures the fundamental asymmetry in upward versus downward returns. We model this feature by using scale gamma distributions for the conditional distributions of positive and negative returns. By allowing the parameters for positive returns to differ from parameters for negative returns we can test the hypothesis of symmetry. Some applications of this process to expected utility and semi-variance calculations are considered. Finally we estimate the model using daily UK FT100 index and Futures data.
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Bibliographic InfoPaper provided by Saskatchewan - Department of Economics in its series Papers with number 95-3.
Length: 18 pages
Date of creation: 1995
Date of revision:
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Postal: UNIVERSITY OF SASKATCHEWAN, DEPARTMENT OF ECONOMICS, SASKATOON SASKATCHEWAN S7N 0W0 CANADA.
Phone: (306) 966-5197
Fax: (306) 966-5232
Web page: http://www.arts.usask.ca/economics/
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risk ; economic models;
Other versions of this item:
- J. L. Knight & S. E. Satchell & K. C. Tran, 1995. "Statistical modelling of asymmetric risk in asset returns," Applied Mathematical Finance, Taylor and Francis Journals, vol. 2(3), pages 155-172.
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- Shaun Bond & Stephen Satchell, 2006. "Asymmetry and downside risk in foreign exchange markets," European Journal of Finance, Taylor and Francis Journals, vol. 12(4), pages 313-332.
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