Comparison of Volatility Measures: a Risk Management Perspective

Christian Timothy Brownlees () and Giampiero M. Gallo ()

Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica "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)
New Economics Papers: this item is included in nep-ecm, nep-fmk, nep-for, nep-mst and nep-rmg
Date: 2008-02
View list of references View citations in EconPapers

Downloads: (external link)
http://www.ds.unifi.it/ricerca/pubblicazioni/working_papers/2008/wp2008_03.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:fir:econom:wp2008_03

Access Statistics for this paper

More papers in Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica "G. Parenti"
Address: Viale G.B. Morgagni, 59 - I-50134 Firenze - Italy
Contact information at EDIRC.
Series data maintained by Margherita Velucchi ().