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Risk Modeling by Coherent Measure Using Family of Generalized Hyperbolic Distributions

In: Trade, Investment and Economic Growth

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  • Prabir Kumar Das

    (Indian Institute of Foreign Trade)

Abstract

We have identified the appropriate probability distribution for describing the return of BSE Sensex to be the generalized hyperbolic family of distributions. The generalized hyperbolic family of distributions was found adequate for describing the probability density based on AIC and likelihood function, which was analytically confirmed by the likelihood ratio test. The generalized hyperbolic distribution coupled with coherent risk measure (expected shortfall) was found appropriate for measuring the trajectories of risk for the confidence level ranging from 95 to 99.9%. It was empirically verified using the return series of BSE Sensex for the period 2013–18.

Suggested Citation

  • Prabir Kumar Das, 2021. "Risk Modeling by Coherent Measure Using Family of Generalized Hyperbolic Distributions," Springer Books, in: Pooja Lakhanpal & Jaydeep Mukherjee & Biswajit Nag & Divya Tuteja (ed.), Trade, Investment and Economic Growth, chapter 0, pages 169-176, Springer.
    • Handle: RePEc:spr:sprchp:978-981-33-6973-3_11
    DOI: 10.1007/978-981-33-6973-3_11
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    More about this item

    Keywords

    Market risk; Value at risk; Expected shortfall; Generalized hyperbolic distribution; Coherent risk;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C19 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Other
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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