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Measuring and Modeling Risk Using High-Frequency Data

Author

Listed:
  • Wolfgang Härdle
  • Nikolaus Hautsch
  • Uta Pigorsch

Abstract

Measuring and modeling financial volatility is the key to derivative pricing, asset allocation and risk management. The recent availability of high-frequency data allows for refined methods in this field. In particular, more precise measures for the daily or lower frequency volatility can be obtained by summing over squared high-frequency returns. In turn, this so-called realized volatility can be used for more accurate model evaluation and description of the dynamic and distributional structure of volatility. Moreover, non-parametric measures of systematic risk are attainable, that can straightforwardly be used to model the commonly observed time-variation in the betas. The discussion of these new measures and methods is accompanied by an empirical illustration using high-frequency data of the IBM incorporation and of the DJIA index.

Suggested Citation

  • Wolfgang Härdle & Nikolaus Hautsch & Uta Pigorsch, 2008. "Measuring and Modeling Risk Using High-Frequency Data," SFB 649 Discussion Papers SFB649DP2008-045, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  • Handle: RePEc:hum:wpaper:sfb649dp2008-045
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    Citations

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    Cited by:

    1. Weber, Enzo & Zhang, Yanqun, 2012. "Common influences, spillover and integration in Chinese stock markets," Journal of Empirical Finance, Elsevier, vol. 19(3), pages 382-394.
    2. Enzo Weber, 2008. "Structural Dynamic Conditional Correlation," SFB 649 Discussion Papers SFB649DP2008-069, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    3. Zhang, Zhengjun & Zhu, Bin, 2016. "Copula structured M4 processes with application to high-frequency financial data," Journal of Econometrics, Elsevier, vol. 194(2), pages 231-241.
    4. Till Dannewald & Lutz Hildebrandt, 2008. "A Brand Specific Investigation of International Cost Shock Threats on Price and Margin with a Manufacturer-Wholesaler-Retailer Model," SFB 649 Discussion Papers SFB649DP2008-070, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

    More about this item

    Keywords

    Realized Volatility; Realized Betas; Volatility Modeling;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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