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on Market Microstructure |
| By: | Bertrand Maillet (Centre d'Economie de la Sorbonne, EIF, A.A.Advisors-QCG (ABN AMRO)and Variances); Jean-Philippe Médecin (Centre d'Economie de la Sorbonne and Variances); Thierry Michel (LODH) |
| Abstract: | 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 for a long history. We also study the distribution of the volatility, focusing more precisely on the slopee 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 CAC 40 series in the period 1997-2006, using both Maximum Likelihood and L-moment Methods, we, finally find no evidence for the need of a specification with heavier tails than in the case of the traditional log-normal hypothesis. |
| Keywords: | Financial crisis, volatility estimator distributions, range-based volatility, extreme value, high frequency data. |
| JEL: | G10 G14 |
| Date: | 2009–08 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:09054&r=mst |
| By: | Silvia Muzzioli |
| Abstract: | The aim of this paper is twofold: to investigate how the information content of implied volatility varies according to moneyness and option type and to compare the latter option based forecasts with historical volatility in order to see if they subsume all the information contained in the latter. We run a horse race of different implied volatility estimates: at the money and out of the money call and put implied volatilities and average implied that is a weighted average of at the money call and put implied volatilities with weights proportional to trading volume. Two hypotheses are tested: unbiasedness and efficiency of the different volatility forecasts. The investigation is pursued in the Dax index options market, by using synchronous prices matched in a one minute interval. The results highlight that the information content of implied volatility has a humped shape, with out of the money options being less informative than at the money ones. Overall, the best forecast is at the money put implied volatility: it is unbiased (after a constant adjustment) and efficient, in that it subsumes all the information contained in historical volatility. |
| Keywords: | implied Volatility; volatility Smile; volatility forecasting; option type |
| JEL: | G13 G14 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:mod:depeco:0617&r=mst |
| By: | Park, A.; Sgroi, D. |
| Abstract: | Herding and contrarian behavior are often-cited features of real-world financial markets. Theoretical models of continuous trading that study herding and contrarianism, however, usually do not allow traders to choose when to trade or to trade more than once. We present a large-scale experiment to explore these features within a tightly controlled laboratory environment. Herding and contrarianism are significantly more pronounced than in compa- rable studies that do not allow traders to time their decisions. Traders with extreme information tend to trade earliest, followed by those with information conducive to contrarianism, while those with the theoretical potential to herd delay the most. |
| Keywords: | Herding, Contrarianism, Endogenous-time Trading, Experiments |
| JEL: | C91 D82 G14 |
| Date: | 2009–10–12 |
| URL: | http://d.repec.org/n?u=RePEc:cam:camdae:0941&r=mst |