We propose a new framework exploiting realized measures of volatility to estimate and forecast extreme quantiles. Our realized extreme quantile (REQ) combines quantile regression with extreme value theory and uses a measurement equation that relates the realized measure to the latent conditional quantile. Model estimation is performed by quasi maximum likelihood, and a simulation experiment validates this estimator in finite samples. An extensive empirical analysis shows that high-frequency measures are particularly informative of the dynamic quantiles. Finally, an out-of-sample forecast analysis of quantile-based risk measures confirms the merit of the REQ.

Bee, M., Dupuis, D.J., Trapin, L. (2018). Realized extreme quantile: A joint model for conditional quantiles and measures of volatility with EVT refinements. JOURNAL OF APPLIED ECONOMETRICS, 33(3), 398-415 [10.1002/jae.2615].

Realized extreme quantile: A joint model for conditional quantiles and measures of volatility with EVT refinements

Trapin, Luca
2018

Abstract

We propose a new framework exploiting realized measures of volatility to estimate and forecast extreme quantiles. Our realized extreme quantile (REQ) combines quantile regression with extreme value theory and uses a measurement equation that relates the realized measure to the latent conditional quantile. Model estimation is performed by quasi maximum likelihood, and a simulation experiment validates this estimator in finite samples. An extensive empirical analysis shows that high-frequency measures are particularly informative of the dynamic quantiles. Finally, an out-of-sample forecast analysis of quantile-based risk measures confirms the merit of the REQ.
2018
Bee, M., Dupuis, D.J., Trapin, L. (2018). Realized extreme quantile: A joint model for conditional quantiles and measures of volatility with EVT refinements. JOURNAL OF APPLIED ECONOMETRICS, 33(3), 398-415 [10.1002/jae.2615].
Bee, Marco; Dupuis, Debbie J.; Trapin, Luca
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11585/714963
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