HIGH MOMENT VARIATIONS AND THEIR APPLICATION

Cited 6 time in webofscience Cited 0 time in scopus
  • Hit : 454
  • Download : 0
We propose a new method of measuring the third and fourth moments of return distribution based on quadratic variation method when the return process is assumed to have zero drift. The realized third and fourth moment variations computed from high-frequency return series are good approximations to corresponding actual moments of the return distribution. An investor holding an asset with skewed or fat-tailed distribution is able to hedge the tail risk by contracting the third or fourth moment swap under which the float leg of realized variation and the predetermined fixed leg are exchanged. Thus, constructed portfolio follows more Gaussian-like distribution and hence the investor effectively hedges the tail risk.
Publisher
WILEY-BLACKWELL
Issue Date
2014-11
Language
English
Article Type
Article
Keywords

CONDITIONAL SKEWNESS; STOCHASTIC VOLATILITY; REALIZED VOLATILITY; VARIANCE; VALUATION

Citation

JOURNAL OF FUTURES MARKETS, v.34, no.11, pp.1040 - 1061

ISSN
0270-7314
DOI
10.1002/fut.21635
URI
http://hdl.handle.net/10203/194487
Appears in Collection
MA-Journal Papers(저널논문)
Files in This Item
There are no files associated with this item.
This item is cited by other documents in WoS
⊙ Detail Information in WoSⓡ Click to see webofscience_button
⊙ Cited 6 items in WoS Click to see citing articles in records_button

qr_code

  • mendeley

    citeulike


rss_1.0 rss_2.0 atom_1.0