Measuring Downside Risk - Realised Semivariance

CREATES Research Paper No. 2008-42

24 Pages Posted: 3 Sep 2008

See all articles by Ole E. Barndorff-Nielsen

Ole E. Barndorff-Nielsen

University of Aarhus - Thiele Centre, Department of Mathematical Sciences

Silja Kinnebrock

University of Oxford

Neil Shephard

Harvard University

Date Written: September 2, 2008

Abstract

We propose a new measure of risk, based entirely on downwards moves measured using high frequency data. Realised semivariances are shown to have important predictive qualities for future market volatility. The theory of these new measures is spelt out, drawing on some new results from probability theory.

Keywords: Market frictions, Quadratic variation, Realised variance, Semimartingale, Semivariance

Suggested Citation

Barndorff-Nielsen, Ole E. and Kinnebrock, Silja and Shephard, Neil, Measuring Downside Risk - Realised Semivariance (September 2, 2008). CREATES Research Paper No. 2008-42. Available at SSRN: https://ssrn.com/abstract=1262194 or http://dx.doi.org/10.2139/ssrn.1262194

Ole E. Barndorff-Nielsen (Contact Author)

University of Aarhus - Thiele Centre, Department of Mathematical Sciences ( email )

Ny Munkegade
Aarhus, DK 8000
Denmark

Silja Kinnebrock

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Neil Shephard

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

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