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A Low Price Correction for Improved Volatility Estimation and Forecasting

by †,‡ and *,†,‡
Department of Mathematics, University of the Aegean, GR-83200 Karlovasi, Samos, Greece
*
Author to whom correspondence should be addressed.
Current address: Division of Statistics and Actuarial-Financial Mathematics, Department of Mathematics, University of the Aegean, GR-83200 Karlovasi, Samos, Greece
These authors contributed equally to this work.
Risks 2017, 5(3), 45; https://doi.org/10.3390/risks5030045
Received: 9 July 2017 / Revised: 21 August 2017 / Accepted: 22 August 2017 / Published: 28 August 2017
In this work, we focus on volatility estimation which plays a crucial role in risk analysis and management. In order to improve value at risk (VaR) forecasts, we discuss the concept of low price effect and introduce the low price correction which does not require any additional parameters and instead of returns it takes into account the prices of the asset. Judgement on the forecasting quality of the proposed methodology is based on both the relative number of violations and VaR volatility. For illustrative purposes, a real example from the Athens Stock Exchange is fully explored. View Full-Text
Keywords: MA; EWMA; ARCH; GARCH; APARCH; FIGARCH; VaR; violation ratios; leverage effect; low price effect; backtesting MA; EWMA; ARCH; GARCH; APARCH; FIGARCH; VaR; violation ratios; leverage effect; low price effect; backtesting
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MDPI and ACS Style

Siouris, G.-J.; Karagrigoriou, A. A Low Price Correction for Improved Volatility Estimation and Forecasting. Risks 2017, 5, 45. https://doi.org/10.3390/risks5030045

AMA Style

Siouris G-J, Karagrigoriou A. A Low Price Correction for Improved Volatility Estimation and Forecasting. Risks. 2017; 5(3):45. https://doi.org/10.3390/risks5030045

Chicago/Turabian Style

Siouris, George-Jason, and Alex Karagrigoriou. 2017. "A Low Price Correction for Improved Volatility Estimation and Forecasting" Risks 5, no. 3: 45. https://doi.org/10.3390/risks5030045

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