Munich Personal RePEc Archive

Superkurtosis

Degiannakis, Stavros and Filis, George and Siourounis, Grigorios and Trapani, Lorenzo (2019): Superkurtosis.

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Abstract

Very little is known on how traditional risk metrics behave in ultra high frequency trading (UHFT). We fi�ll this void �firstly by examining the existence of the intraday returns moments, and secondly by assessing the impact of their (non)existence in a risk management framework. We show that in the case of UHFT, the returns' third and fourth moments do not exist, which entails that traditional risk metrics are unable to judge capital adequacy adequately. Hence, the use of risk management techniques, such as VaR, by market participants who engage with UHFT impose serious threats to the stability of fi�nancial markets, given that capital ratios may be severely underestimated.

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