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Practical Volatility and Correlation Modeling for Financial Market Risk Management
Francis X. Diebold / Peter F. Christoffersen / Tim Bollerslev / Torben G. Andersen
econometrics / market riskResource overview

Practical Volatility and Correlation Modeling for Financial Market Risk Management

Paper2005

by Francis X. Diebold, Peter F. Christoffersen, Tim Bollerslev, Torben G. Andersen

Tags
econometricsmarket riskrisk managementtime seriesvolatility forecasting

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Understand this paper

Suggested foundations for volatility models and surfaces and risk measurement and stress. Specialist prerequisites vary by paper.

Before you read

  1. Stochastic Processes, Brownian Motion and Itô's Lemma

    Follow diffusion-based models and their assumptions.

  2. ARCH and GARCH

    Separate conditional volatility from observed returns.

  3. Random Variables and Distributions

    Represent losses as a distribution rather than one forecast.

  4. Expected Shortfall and Other Tail Risk Measures

    Distinguish a loss quantile from the average loss in the tail.

Go further

  1. Stochastic Volatility and the Heston Model

    Study a correlated stochastic-variance model.

  2. Reading the Implied Vol Surface — Moneyness, Term Structure, and Quoting Conventions

    Interpret prices across strikes and expiries.

  3. VaR Estimation in Practice: Variance-Covariance, Historical Simulation, Monte Carlo

    Compare risk estimators and their assumptions.

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Lesson links open public previews. Access to full lessons depends on the topic and your membership.

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