Drawdown-based risk indicators for high-frequency financial volumes

Autor: Guglielmo D’Amico, Bice Di Basilio, Filippo Petroni
Jazyk: angličtina
Rok vydání: 2024
Předmět:
Zdroj: Financial Innovation, Vol 10, Iss 1, Pp 1-40 (2024)
Druh dokumentu: article
ISSN: 2199-4730
DOI: 10.1186/s40854-023-00593-0
Popis: Abstract In stock markets, trading volumes serve as a crucial variable, acting as a measure for a security’s liquidity level. To evaluate liquidity risk exposure, we examine the process of volume drawdown and measures of crash-recovery within fluctuating time frames. These moving time windows shield our financial indicators from being affected by the massive transaction volume, a characteristic of the opening and closing of stock markets. The empirical study is conducted on the high-frequency financial volumes of Tesla, Netflix, and Apple, spanning from April to September 2022. First, we model the financial volume time series for each stock using a semi-Markov model, known as the weighted-indexed semi-Markov chain (WISMC) model. Second, we calculate both real and synthetic drawdown-based risk indicators for comparison purposes. The findings reveal that our risk measures possess statistically different distributions, contingent on the selected time windows. On a global scale, for all assets, financial risk indicators calculated on data derived from the WISMC model closely align with the real ones in terms of Kullback–Leibler divergence.
Databáze: Directory of Open Access Journals
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