High Watermarks of Market Risk
Bertrand B. Maillet
University of Orléans; LEO/CNRS
CES/CNRS - University of Paris-1 (Panthéon-Sorbonne)
Lombard Odier & Cie
March 1, 2009
We present several estimates of measures of risk amongst the most well-known, using both high and low frequency data. The aim of the article is to show which lower frequency measures can be an acceptable substitute to the high precision measures, when transaction data is unavailable on long history. We also study the distribution of the volatility, focusing more precisely on the slope of the tail of the various risk measure distributions, in order to define the high watermarks of market risks. Based on estimates of the tail index of a Generalized Extreme Value density backed-out from the high frequency CAC40 series on the period 1997-2006 using both Maximum Likelihood and L-moment Methods, we finally do not find evidence for the need of a specification with heavier tails than in the case of the traditional log-normal hypothesis.
Number of Pages in PDF File: 20
Keywords: Financial Crisis, Volatility Estimators Distributions, Range-based Volatility, Extreme Value, High Frequency Data
JEL Classification: G10,G14working papers series
Date posted: March 1, 2007 ; Last revised: November 12, 2010
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