Superkurtosis

Stavros Degiannakis, George Filis, Grigorios Siourounis and Lorenzo Trapani
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Grigorios Siourounis: Panteion University of Social and Political Science, and Brown University
Lorenzo Trapani: University of Nottingham

No 318, Working Papers from Bank of Greece

Abstract: Very little is known on how traditional risk metrics behave under intraday trading. We fill this void by examining the finiteness of the returns’ moments and assessing the impact of their infinity in a risk management framework. We show that when intraday trading is considered, assuming finite higher order moments, potential losses are materially larger than what the theory predicts, and they increase exponentially as the trading frequency increases - a phenomenon we call superkurtosis. Hence, the use of the current risk management techniques under intraday trading impose threats to the stability of financial markets, given that capital ratios may be severely underestimated.

Keywords: Nowcasting; forecasting, GDP; disaggregation; factors; multilayer; mixed frequency (search for similar items in EconPapers)
JEL-codes: C53 E27 (search for similar items in EconPapers)
Pages: 44
Date: 2023-04
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Related works:
Journal Article: Superkurtosis (2023)
Working Paper: Superkurtosis (2019)
Working Paper: Superkurtosis (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bog:wpaper:318

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