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Dynamic trading value at risk: Futures floor trading
Author(s) -
Lee Jongdoo,
Locke Peter
Publication year - 2006
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.20239
Subject(s) - futures contract , predictability , volatility (finance) , economics , financial economics , econometrics , value (mathematics) , realized variance , futures market , trading strategy , computer science , physics , quantum mechanics , machine learning
Speculative traders' dynamic trading strategies are not easy to model, because they depend on latent information flows and preferences. As a result, the risks involved in such strategies may only be revealed by examining empirical distributions of ex post returns to traders engaged in speculative activities. The authors' comprehensive data from futures floor trader's proprietary trading allows for an empirical examination of one prominent type of speculative trader risk. It is shown that floor trader “value at risk” can be predicted somewhat, using simple market variables such as volume and volatility. Although some predictability for the crosssectional distribution of floor trader income, and hence risk was found, not much was determined in terms of trader‐specific characteristics. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1217–1234, 2006