Abstract
The objective of this paper is to investigate the use of tick-by-tick data for market risk measurement. We propose an Intraday Value at Risk (IVaR) at different horizons based on irregularly time-spaced high-frequency data by using an intraday Monte Carlo simulation. An UHF-GARCH model extending the framework of Engle (2000) is used to specify the joint density of the marked-point process of durations and high-frequency returns. We apply our methodology to transaction data for the Royal Bank and the Placer Dome stocks traded on the Toronto Stock Exchange. Results show that our approach constitutes reliable means of measuring intraday risk for traders who are very active on the market. The UHF-GARCH model performs well out-of-sample for almost all the time horizons and the confidence levels considered even when normality is assumed for the distribution of the error term, provided that intraday seasonality has been accounted for prior to the estimation.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
