High Watermarks of Market Risk

20 Pages Posted: 1 Mar 2007 Last revised: 12 Nov 2010

See all articles by Bertrand B. Maillet

Bertrand B. Maillet

EMLyon Business School (Paris Campus)

Jean-Philippe Medecin

CES/CNRS - University of Paris-1 (Panthéon-Sorbonne)

Thierry Michel

Lombard Odier & Cie

Date Written: 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.

Keywords: Financial Crisis, Volatility Estimators Distributions, Range-based Volatility, Extreme Value, High Frequency Data

JEL Classification: G10,G14

Suggested Citation

Maillet, Bertrand B. and Medecin, Jean-Philippe and Michel, Thierry, High Watermarks of Market Risk (March 1, 2009). Available at SSRN: https://ssrn.com/abstract=966283 or http://dx.doi.org/10.2139/ssrn.966283

Bertrand B. Maillet (Contact Author)

EMLyon Business School (Paris Campus) ( email )

23 Avenue Guy de Collongue
Ecully, 69132

Jean-Philippe Medecin

CES/CNRS - University of Paris-1 (Panthéon-Sorbonne) ( email )

106 bv de l'Hôpital
Paris, 75013

Thierry Michel

Lombard Odier & Cie ( email )

11 rue de la Corraterie
Geneva, 1211

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