Comparison of Volatility Measures: a Risk Management Perspective

Christian Brownlees and Giampiero Gallo ()

Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"

Abstract: In this paper we address the issue of forecasting Value–at–Risk (VaR) using different volatility measures: realized volatility, bipower realized volatility, two scales realized volatility, realized kernel as well as the daily range. We propose a dynamic model with a flexible trend specification bonded with a penalized maximum likelihood estimation strategy: the P-Spline Multiplicative Error Model. Exploiting UHFD volatility measures, VaR predictive ability is considerably improved upon relative to a baseline GARCH but not so relative to the range; there are relevant gains from modeling volatility trends and using realized kernels that are robust to dependent microstructure noise.

Keywords: Volatility Measures; VaR Forecasting; GARCH; MEM; P-Spline. (search for similar items in EconPapers)
JEL-codes: C22 C51 C52 C53 (search for similar items in EconPapers)
Date: 2008-02
New Economics Papers: this item is included in nep-ecm, nep-fmk, nep-for, nep-mst and nep-rmg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Comparison of Volatility Measures: a Risk Management Perspective (2010)
Working Paper: Comparison of Volatility Measures: a Risk Management Perspective (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2008_03

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