Abstract

http://ssrn.com/abstract=868594
 
 

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Intraday Value at Risk (IVaR) Using Tick-by-Tick Data with Application to the Toronto Stock Exchange


Georges Dionne


HEC Montreal - Department of Finance

Pierre Duchesne


University of Montreal - Department of Mathematics and Statistics

Maria Pacurar


Rowe School of Business, Dalhousie University

December 13, 2005


Abstract:     
The objective of this paper is to investigate the use of tick-by-tick data for market risk measurement. We propose an Intraday Value at Risk (IVaR) at different horizons based on irregularly time-spaced high-frequency data by using an intraday Monte Carlo simulation. An UHF-GARCH model extending the framework of Engle (2000) is used to specify the joint density of the marked-point process of durations and high-frequency returns. We apply our methodology to transaction data for the Royal Bank and the Placer Dome stocks traded on the Toronto Stock Exchange. Results show that our approach constitutes reliable means of measuring intraday risk for traders who are very active on the market. The UHF-GARCH model performs well out-of-sample for almost all the time horizons and the confidence levels considered even when normality is assumed for the distribution of the error term, provided that intraday seasonality has been accounted for prior to the estimation.

Number of Pages in PDF File: 39

Keywords: Value at Risk, tick-by-tick data, UHF-GARCH models, intraday market risk, high-frequency models, intraday Monte Carlo simulation, Intraday Value at Risk

JEL Classification: C22, C41, C53, G15

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Date posted: December 8, 2005  

Suggested Citation

Dionne, Georges and Duchesne, Pierre and Pacurar, Maria, Intraday Value at Risk (IVaR) Using Tick-by-Tick Data with Application to the Toronto Stock Exchange (December 13, 2005). Available at SSRN: http://ssrn.com/abstract=868594 or http://dx.doi.org/10.2139/ssrn.868594

Contact Information

Georges Dionne
HEC Montreal - Department of Finance ( email )
3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-6596 (Phone)
514-340-5019 (Fax)
HOME PAGE: http://www.hec.ca/gestiondesrisques/
Pierre Duchesne
University of Montreal - Department of Mathematics and Statistics ( email )
Montreal, Quebec H3C 3J7
Canada
Maria Pacurar (Contact Author)
Rowe School of Business, Dalhousie University ( email )
6100 University Avenue
Halifax, Nova Scotia B3H 4R2
Canada
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