Complex interactions between fundamentals and liquidity during unstable periods in financial markets are succinctly modeled with coordination games. We propose a flexible framework to estimate such a model and use the efficient method of moments as estimation procedure. We illustrate the model...

Precise estimation of the tail shape of forex returns is of critical importance for proper risk assessment. We improve upon the efficiency of conventional estimators that rely on a first order expansion of the tail shape, by using the second order expansion. Here we advocate a moments estimator...

Opening, lunch and closing of financial markets induce a periodic component in the volatility of high-frequency returns. We show that price jumps cause a large bias in the classical periodicity estimators and propose robust alternatives. We find that accounting for periodicity greatly improves...

Quadratic covariation is a popular descriptive measure for the volatility of a multivariate price process. It is consistently estimated by the sum of outer products of high-frequency returns.The proposed Realized Outlyingness Weighted Covariation (ROWCov) is a \emph{weighted} sum of outer...

Large one-off events cause large changes in prices, but may not affect the volatility and correlation dynamics as much as smaller events. In such cases, standard volatility models may deliver biased covariance forecasts. We propose a multivariate volatility forecasting model that is accurate in...

Modied Value at Risk (VaR) is an estimator of VaR based on the Cornish-Fisher expansion. It is fast to compute and reliable for non-normal returns. In this paper, we introduce modified Expected Shortfall as a new analytical estimator for Expected Shortfall (ES), another popular measure of...

In this paper we show how to compute a daily VaR measure for two stock indexes (CAC40 and SP500) using the one-day-ahead forecast of the daily realized volatility. The daily realized volatility is equal to the sum of the squared intraday returns over a given day and thus uses intraday...

This article assesses the impact of official FOREX interventions of the three major central banks in terms of the dynamics of the currency components of the major exchange rates over the period 1989 2003. We identify the currency components of the mean and volatility processes of exchange rates...

We analyze the relationship between interventions and volatility at daily and intra-daily frequencies for the two major exchange rate markets. Using recent econometric methods to estimate realized volatility, we employ bipower variation to decompose this volatility into a continuously varying...