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.

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
Social Sciences (miscellaneous); Economics and Econometrics
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11384/73194
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