Characterization of large price variations in financial markets

Details Characterization of large price variations in financial markets Characterization of large price variations in financial markets

2002-10-25

arxiv.org/abs/cond-mat/0210574v1

Physics

Condensed Matter

7 pages and 5 figures. To be published in Physica A, Proceedings of International Econophysics Conference, Bali, August 28-31,

Scientific paper

10.1016/S0378-4371(02)01843-5

Statistics of drawdowns (loss from the last local maximum to the next local minimum) plays an important role in risk assessment of investment strategies. As they incorporate higher ($>$ two) order correlations, they offer a better measure of real market risks than the variance or other cumulants of daily (or some other fixed time scale) of returns. Previous results have shown that the vast majority of drawdowns occurring on the major financial markets have a distribution which is well-represented by a stretched exponential, while the largest drawdowns are occurring with a significantly larger rate than predicted by the bulk of the distribution and should thus be characterized as outliers. In the present analysis, the definition of drawdowns is generalised to coarse-grained drawdowns or so-called epsilon-drawdowns and a link between such epsilon-outliers and preceding log-periodic power law bubbles previously identified is established.

Affiliated with

Also associated with

No associations

Rating

Characterization of large price variations in financial markets does not yet have a rating. At this time, there are no reviews or comments for this scientific paper.

If you have personal experience with Characterization of large price variations in financial markets, we encourage you to share that experience with our LandOfFree.com community. Your opinion is very important and Characterization of large price variations in financial markets will most certainly appreciate the feedback.

Rate now

Comments { 0 }

Profile ID: LFWR-SCP-O-614289