Related papers: Absolute Return Volatility
Key to the imposition of appropriate minimum capital requirements on a daily basis requires accurate volatility estimation. Here, measures are presented based on discrete estimation of aggregated high frequency UK futures realisations…
We calculate the realized volatility in the spin model of financial markets and examine the returns standardized by the realized volatility. We find that moments of the standardized returns agree with the theoretical values of standard…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
We describe how the market-based average and volatility of the "actual" return, which the investors gain within their market sales, depend on the statistical moments, volatilities, and correlations of the current and past market trade…
This paper investigates how to measure common market risk factors using newly proposed Panel Quantile Regression Model for Returns. By exploring the fact that volatility crosses all quantiles of the return distribution and using penalized…
We proposed a market simulation model (micro model) which displays multifractality and reproduces many important stylized facts of speculative markets. From this model we analytically extracted the MMAR model (Multifractal Model of Asset…
Correlations between asset returns are important in many financial applications. In recent years, multivariate volatility models have been used to describe the time-varying feature of the correlations. However, the curse of dimensionality…
We introduce the concept of virtual volatility. This simple but new measure shows how to quantify the uncertainty in the forecast of the drift component of a random walk. The virtual volatility also is a useful tool in understanding the…
An asset pricing model using long-run capital share growth risk has recently been found to successfully explain U.S. stock returns. Our paper adopts a recursive preference utility framework to derive an heterogeneous asset pricing model…
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
This paper examines the possibility of using derivative-implied risk premia to explain stock returns. The rapid development of derivative markets has led to the possibility of trading various kinds of risks, such as credit and interest rate…
This study utilised the dynamics of five time-varying models to estimate six essential features of financial return volatility that are relevant for robust risk management. These features include pronounced persistence, mean reversion,…
We assume that an individual invests in a financial market with one riskless and one risky asset, with the latter's price following a diffusion with stochastic volatility. In the current financial market especially, it is important to…
I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational…
The paper discusses capital allocation using the Euler formula and focuses on the risk measures Value-at-Risk (VaR) and Expected shortfall (ES). Some new results connected to this capital allocation is known. Two examples illustrate that…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
We provide sufficient conditions under which a utility function may be recovered from a finite choice experiment. Identification, as is commonly understood in decision theory, is not enough. We provide a general recoverability result that…
We analyze characteristics' joint predictive information through the lens of out-of-sample power utility functions. Linking weights to characteristics to form optimal portfolios suffers from estimation error which we mitigate by maximizing…
This paper develops a flexible and computationally efficient multivariate volatility model, which allows for dynamic conditional correlations and volatility spillover effects among financial assets. The new model has desirable properties…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…