A Low Price Correction for Improved Volatility Estimation and Forecasting
In this work, we focus on volatility estimation which plays a crucial role in risk analysis and management. In order to improve value at risk (VaR) forecasts, we discuss the concept of low price effect and introduce the low price correction which does not require any additional parameters and instea...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
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MDPI AG
2017-08-01
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| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/5/3/45 |
| Summary: | In this work, we focus on volatility estimation which plays a crucial role in risk analysis and management. In order to improve value at risk (VaR) forecasts, we discuss the concept of low price effect and introduce the low price correction which does not require any additional parameters and instead of returns it takes into account the prices of the asset. Judgement on the forecasting quality of the proposed methodology is based on both the relative number of violations and VaR volatility. For illustrative purposes, a real example from the Athens Stock Exchange is fully explored. |
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| ISSN: | 2227-9091 |