Richard Warnung
Scaling portfolio volatility and calculating risk contributions in the presence of serial cross-correlations.
Tue, 09/21/2010 - 15:01 — SomNambulAuthors: Richard Warnung, Nikolaus Rab
Subjects: Risk Management
AbstractIn practice daily volatility of portfolio returns is transformed to longer
holding periods by multiplying by the square-root of time which assumes that
returns are not serially correlated. Under this assumption this procedure of
scaling can also be applied to contributions to volatility of the assets in the
portfolio. Trading at exchanges located in different time zones can lead to
significant serial cross-correlations of the returns of these assets when using
close prices as is usually done in practice. These serial correlations cause
the square-root-of-time rule to fail.Hiding a drift.
Thu, 12/10/2009 - 16:01 — SomNambulAuthors: Walter Schachermayer, Miklós Rásonyi, Richard Warnung
Subjects: Probability
AbstractIn this article we consider a Brownian motion with drift of the form
\[dS_t=\mu_t dt+dB_t\qquadfor t\ge0,\] with a specific nontrivial
$(\mu_t)_{t\geq0}$, predictable with respect to $\mathbb{F}^B$, the natural
filtration of the Brownian motion $B=(B_t)_{t\ge0}$.
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