A multi-horizon scale for volatility

Alexander Subbotin ()
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Alexander Subbotin: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, Higher School of Economics - State University

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Abstract: We decompose volatility of a stock market index both in time and scale using wavelet filters and design a probabilistic indicator for valatilities, analogous to the Richter scale in geophysics. The peak-over-threshold method is used to fit the generalized Pareto probability distribution for the extreme values in the realized variances of wavelet coefficients. The indicator is computed for the daily Dow Jones Industrial Averages index data from 1986 to 2007 and for the intraday CAC 40 data from 1995 to 2006. The results are used for comparison and structural multi-resolution analysis of extreme events on the stock market and for the detection of financial crises.

Keywords: Stock market; volatility; wavelets; multi-resolution analysis; financial crisis.; financial crisis; Marché d'actions; volatilité; ondelettes; analyse multirésolution; crises financières. (search for similar items in EconPapers)
Date: 2008-03
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00261514
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Citations: View citations in EconPapers (12)

Published in 2008

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