RiskMetricsâ¢ âTechnical Document

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42 RiskMetrics —Technical <strong>Document</strong> Fourth Edition
43 Chapter 4. Statistical and probability foundations 4.1 Definition of financial price changes and returns 45 4.1.1 One-day (single period) horizon 45 4.1.2 Multiple-day (multi-period) horizon 47 4.1.3 Percent and continuous compounding in aggregating returns 48 4.2 Modeling financial prices and returns 49 4.2.1 Random walk model for single-price assets 50 4.2.2 Random walk model for fixed income instruments 51 4.2.3 Time-dependent properties of the random walk model 51 4.3 Investigating the random-walk model 54 4.3.1 Is the distribution of returns constant over time? 54 4.3.2 Are returns statistically independent over time? 56 4.3.3 Multivariate extensions 62 4.4 Summary of our findings 64 4.5 A review of historical observations of return distributions 64 4.5.1 Modeling methods 65 4.5.2 Properties of the normal distribution 66 4.5.3 The lognormal distribution 72 4.6 RiskMetrics model of financial returns: A modified random walk 73 4.7 Summary 74 Part II: Statistics of Financial Market Returns
Page 1 and 2: J.P.Morgan/Reuters RiskMetrics TM
Page 3 and 4: Preface to the fourth edition iii T
Page 5 and 6: Preface to the fourth edition v •
Page 7 and 8: vii Table of contents Part I Risk M
Page 9 and 10: ix List of charts Chart 1.1 VaR sta
Page 11 and 12: xi List of tables Table 2.1 Two dis
Page 13: 41 Part II Statistics of Financial
Page 17 and 18: 45 Chapter 4. Statistical and proba
Page 19 and 20: Sec. 4.1 Definition of financial pr
Page 21 and 22: Sec. 4.2 Modeling financial prices
Page 27 and 28: Sec. 4.3 Investigating the random-w
Page 37 and 38: Sec. 4.5 A review of historical obs
Page 45 and 46: Sec. 4.6 RiskMetrics model of finan
Page 47 and 48: 75 Chapter 5. Estimation and foreca
Page 49 and 50: 77 Chapter 5. Estimation and foreca
Page 51 and 52: Sec. 5.2 RiskMetrics forecasting me
Page 63 and 64: Sec. 5.3 Estimating the parameters
Page 65 and 66:
Sec. 5.3 Estimating the parameters
Page 67 and 68:
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Page 73 and 74:
Sec. 5.4 Summary and concluding rem
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