Risk Everywhere

Modeling and Managing Volatility

Tim Bollerslev, Benjamin Hood, John Huss, Lasse Heje Pedersen

Research output: Contribution to journalJournal articleResearchpeer-review

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Abstract

Based on high-frequency data for more than fifty commodities, currencies, equity indices, and fixed-income instruments spanning more than two decades, we document strong similarities in realized volatility patterns within and across asset classes. Exploiting these similarities through panel-based estimation of new realized volatility models results in superior out-of-sample risk forecasts, compared to forecasts from existing models and conventional procedures that do not incorporate the similarities in volatilities. We develop a utility-based framework for evaluating risk models that shows significant economic gains from our new risk model. Lastly, we evaluate the effects of transaction costs and trading speed in implementing different risk models.
Original languageEnglish
JournalReview of Financial Studies
Volume31
Issue number7
Pages (from-to)2730-2773
Number of pages44
ISSN0893-9454
DOIs
Publication statusPublished - Jul 2018

Cite this

Bollerslev, Tim ; Hood, Benjamin ; Huss, John ; Pedersen, Lasse Heje. / Risk Everywhere : Modeling and Managing Volatility. In: Review of Financial Studies. 2018 ; Vol. 31, No. 7. pp. 2730-2773.
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Risk Everywhere : Modeling and Managing Volatility. / Bollerslev, Tim ; Hood, Benjamin; Huss, John; Pedersen, Lasse Heje.

In: Review of Financial Studies, Vol. 31, No. 7, 07.2018, p. 2730-2773.

Research output: Contribution to journalJournal articleResearchpeer-review

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