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 |
| Published: |
MDPI AG
2017-08-01
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| Series: | Risks |
| Subjects: | |
| Online Access: | https://www.mdpi.com/2227-9091/5/3/45 |
| _version_ | 1818033290949427200 |
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| author | George-Jason Siouris Alex Karagrigoriou |
| author_facet | George-Jason Siouris Alex Karagrigoriou |
| author_sort | George-Jason Siouris |
| collection | DOAJ |
| description | 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. |
| first_indexed | 2024-12-10T06:20:55Z |
| format | Article |
| id | doaj.art-620db2e65cd74ef89bfd1e95385247e6 |
| institution | Directory Open Access Journal |
| issn | 2227-9091 |
| language | English |
| last_indexed | 2024-12-10T06:20:55Z |
| publishDate | 2017-08-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Risks |
| spelling | doaj.art-620db2e65cd74ef89bfd1e95385247e62022-12-22T01:59:20ZengMDPI AGRisks2227-90912017-08-01534510.3390/risks5030045risks5030045A Low Price Correction for Improved Volatility Estimation and ForecastingGeorge-Jason Siouris0Alex Karagrigoriou1Department of Mathematics, University of the Aegean, GR-83200 Karlovasi, Samos, GreeceDepartment of Mathematics, University of the Aegean, GR-83200 Karlovasi, Samos, GreeceIn 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.https://www.mdpi.com/2227-9091/5/3/45MAEWMAARCHGARCHAPARCHFIGARCHVaRviolation ratiosleverage effectlow price effectbacktesting |
| spellingShingle | George-Jason Siouris Alex Karagrigoriou A Low Price Correction for Improved Volatility Estimation and Forecasting Risks MA EWMA ARCH GARCH APARCH FIGARCH VaR violation ratios leverage effect low price effect backtesting |
| title | A Low Price Correction for Improved Volatility Estimation and Forecasting |
| title_full | A Low Price Correction for Improved Volatility Estimation and Forecasting |
| title_fullStr | A Low Price Correction for Improved Volatility Estimation and Forecasting |
| title_full_unstemmed | A Low Price Correction for Improved Volatility Estimation and Forecasting |
| title_short | A Low Price Correction for Improved Volatility Estimation and Forecasting |
| title_sort | low price correction for improved volatility estimation and forecasting |
| topic | MA EWMA ARCH GARCH APARCH FIGARCH VaR violation ratios leverage effect low price effect backtesting |
| url | https://www.mdpi.com/2227-9091/5/3/45 |
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