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Evaluating the Precision of Estimators of Quantile-Based Risk Measures

Author

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  • John Cotter

    (University College Dublin, Ireland)

  • Kevin Dowd

    (The University of Nottingham, UK)

Abstract

This paper examines the intra-day seasonality of transacted limit and market orders in the DEM/USD foreign exchange market. Empirical analysis of completed transactions data based on the Dealing 2000-2 electronic inter-dealer broking system indicates significant evidence of intraday seasonality in returns and return volatilities under usual market conditions. Moreover, analysis of realised tail outcomes supports seasonality for extraordinary market conditions across the trading day.

Suggested Citation

  • John Cotter & Kevin Dowd, 2011. "Evaluating the Precision of Estimators of Quantile-Based Risk Measures," Working Papers 200743, Geary Institute, University College Dublin.
    • Handle: RePEc:ucd:wpaper:2007/43
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    References listed on IDEAS

    as
    1. Yamai, Yasuhiro & Yoshiba, Toshinao, 2002. "Comparative Analyses of Expected Shortfall and Value-at-Risk: Their Estimation Error, Decomposition, and Optimization," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(1), pages 87-121, January.
    2. B. John Manistre & Geoffrey Hancock, 2005. "Variance of the CTE Estimator," North American Actuarial Journal, Taylor & Francis Journals, vol. 9(2), pages 129-156.
    3. Cotter, John & Dowd, Kevin, 2006. "Extreme spectral risk measures: An application to futures clearinghouse margin requirements," Journal of Banking & Finance, Elsevier, vol. 30(12), pages 3469-3485, December.
    4. McNeil, Alexander J. & Frey, Rudiger, 2000. "Estimation of tail-related risk measures for heteroscedastic financial time series: an extreme value approach," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 271-300, November.
    5. Gourieroux, C. & Laurent, J. P. & Scaillet, O., 2000. "Sensitivity analysis of Values at Risk," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 225-245, November.
    6. Song Xi Chen, 2005. "Nonparametric Inference of Value-at-Risk for Dependent Financial Returns," Journal of Financial Econometrics, Oxford University Press, vol. 3(2), pages 227-255.
    7. Yamai, Yasuhiro & Yoshiba, Toshinao, 2002. "Comparative Analyses of Expected Shortfall and Value-at-Risk (2): Expected Utility Maximization and Tail Risk," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(2), pages 95-115, April.
    8. O. Scaillet, 2004. "Nonparametric Estimation and Sensitivity Analysis of Expected Shortfall," Mathematical Finance, Wiley Blackwell, vol. 14(1), pages 115-129, January.
    9. Tak Siu & Howell Tong & Hailiang Yang, 2004. "On Bayesian Value at Risk: From Linear to Non-Linear Portfolios," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 11(2), pages 161-184, June.
    10. Acerbi, Carlo, 2002. "Spectral measures of risk: A coherent representation of subjective risk aversion," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1505-1518, July.
    11. Frey, Rudiger & McNeil, Alexander J., 2002. "VaR and expected shortfall in portfolios of dependent credit risks: Conceptual and practical insights," Journal of Banking & Finance, Elsevier, vol. 26(7), pages 1317-1334, July.
    12. Song Xi Chen, 2008. "Nonparametric Estimation of Expected Shortfall," Journal of Financial Econometrics, Oxford University Press, vol. 6(1), pages 87-107, Winter.
    13. Matthew Pritsker, 1997. "Evaluating Value at Risk Methodologies: Accuracy versus Computational Time," Journal of Financial Services Research, Springer;Western Finance Association, vol. 12(2), pages 201-242, October.
    14. Christian Gourieroux & Wei Liu, 2006. "Sensitivity Analysis of Distortion Risk Measures," Working Papers 2006-33, Center for Research in Economics and Statistics.
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    Cited by:

    1. Wächter, Hans Peter & Mazzoni, Thomas, 2013. "Consistent modeling of risk averse behavior with spectral risk measures," European Journal of Operational Research, Elsevier, vol. 229(2), pages 487-495.
    2. Radu Tunaru, 2015. "Model Risk in Financial Markets:From Financial Engineering to Risk Management," World Scientific Books, World Scientific Publishing Co. Pte. Ltd., number 9524, December.

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    More about this item

    Keywords

    Value at Risk; Expected Shortfall; Spectral Risk Measures; Moments; Precision.;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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    This paper has been announced in the following NEP Reports:

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