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Vineer Bhansali, Qingxi Wang
A few minutes after 1 p.m. Pacific time on April 23, 2013, the U.S. equity markets fell sharply and within a few minutes recovered completely (see Figure 1). One would miss this event completely if one were looking at closing market prices. News articles later attributed the sharp fall to a rumor created by a hack on a news service’s Twitter feed. For those managing the tail risks of investment portfolios, this rerun of the “flash” crash provided a real-time laboratory for identifying where market stresses might lie. High frequency events can also be a valuable source for statistics on rare events. Whereas rare events that occur over lower frequency, longer horizons are much harder to find (and hence much harder to derive statistics from), intraday events create a larger, more accessible data set that can be used to supplement data on tail events.
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