Superkurtosis

Stavros Degiannakis, George Filis, Gregorios Siourounis and Lorenzo Trapani

MPRA Paper from University Library of Munich, Germany

Abstract: Very little is known on how traditional risk metrics behave in ultra high frequency trading (UHFT). We fi�ll this void �firstly by examining the existence of the intraday returns moments, and secondly by assessing the impact of their (non)existence in a risk management framework. We show that in the case of UHFT, the returns' third and fourth moments do not exist, which entails that traditional risk metrics are unable to judge capital adequacy adequately. Hence, the use of risk management techniques, such as VaR, by market participants who engage with UHFT impose serious threats to the stability of fi�nancial markets, given that capital ratios may be severely underestimated.

Keywords: Ultra high frequency trading; risk management; fi�nite moments; superkurtosis. (search for similar items in EconPapers)
JEL-codes: C12 C54 F30 F31 G10 G15 G17 (search for similar items in EconPapers)
Date: 2019-01-14
New Economics Papers: this item is included in nep-rmg
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Related works:
Journal Article: Superkurtosis (2023)
Working Paper: Superkurtosis (2023)
Working Paper: Superkurtosis (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:94473

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