Overnight Risk Model: A Unique Capability

Abstract

We present a novel risk measurement model capable of capturing overnight risk i.e. the risk encountered between the closing time of the previous day and the opening time of the next day. The risk model captures both the overnight risk and also the intraday risk. Statistical models of intraday asset returns must separate the market opening period from the remainder of the day as these follow statistical laws with different properties. Here we present results showing our two models for these two distinct periods.