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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 21: Financial Markets and Risk Management II

SOE 21.4: Vortrag

Donnerstag, 25. März 2010, 12:00–12:30, H46

Measurement of correlations in non-stationary financial time series — •Rudi Schäfer and Thomas Guhr — Fakultät für Physik, Universität Duisburg-Essen, Germany

The measurement of correlations between financial time series is of vital importance for risk management. We address an estimation error that stems from the non-stationarity of the time series. A method is introduced which removes local trends and variable volatility from the time series, while preserving correlations between different time series. We test this method in a Monte-Carlo simulation, and apply it to daily returns of the S&P 500 stocks.