A Complex Systems Approach to Modelling Time-Varying Risk in the Presence of Market Frictions

  • Faff, Robert (Primary Chief Investigator (PCI))
  • Brooks, Robert Darren (Chief Investigator (CI))
  • Fry, Timothy (Chief Investigator (CI))

Project: Research

Project Details

Project Description

Risk and return are two fundamental variables underlying all business decisions. Risk is difficult to measure - potentially leading to sub-optimal outcomes needlessly wasting $millions. This project focuses on two important data problems in risk measurement - thin trading and price limits - applying a complex systems approach. Specifically, we develop a new time varying risk estimator from the class of generalised Tobit models - popular in other areas of economics. Using data across several markets, the new risk measure will be developed, applied and compared to existing approaches. This will improve future decision-making - delivering considerable long-term economic benefits.
StatusFinished
Effective start/end date1/01/0331/12/06

Funding

  • Australian Research Council (ARC): AUD116,000.00
  • RMIT University