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Extreme Value Theory for Tail-Related Risk Measures

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  • Evis Këllezi

    (Department of Econometrics and FAME, University of Geneva,switzerland)

  • Manfred Gilli

    (Department of Econometrics, University of Geneva, Switzerland)

Abstract

Many fields of modern science and engineering have to deal with events which are rare but have significant consequences. Extreme value theory is considered to provide the basis for the statistical modeling of such extremes. The potential of extreme value theory applied to financial problems has only been recognized recently. This paper aims at introducing the fundamentals of extreme value theory as well as practical aspects for estimating and assessing statistical models for tail-related risk measures.

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Bibliographic Info

Paper provided by International Center for Financial Asset Management and Engineering in its series FAME Research Paper Series with number rp18.

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Date of creation: Oct 2000
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Handle: RePEc:fam:rpseri:rp18

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Related research

Keywords: Extreme Value Theory; Generalized Pareto Distribution; Generalized Extreme Value Distribution; Quantile Estimation; Risk Measures; Maximum Likelihood Estimation; Profile Likelihood Confidence Intervals.;

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References

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  1. McNeil, Alexander J. & Frey, Rudiger, 2000. "Estimation of tail-related risk measures for heteroscedastic financial time series: an extreme value approach," Journal of Empirical Finance, Elsevier, vol. 7(3-4), pages 271-300, November.
  2. Longin, Francois M, 1996. "The Asymptotic Distribution of Extreme Stock Market Returns," The Journal of Business, University of Chicago Press, vol. 69(3), pages 383-408, July.
  3. Koedijk, C.G. & Schafgans, M.M.A. & Vries, C.G. de, 1990. "The tail index of exchange rate returns," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3108722, Tilburg University.
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Cited by:
  1. Bystrom, Hans N. E., 2004. "Managing extreme risks in tranquil and volatile markets using conditional extreme value theory," International Review of Financial Analysis, Elsevier, vol. 13(2), pages 133-152.
  2. Gupta, Anurag & Liang, Bing, 2005. "Do hedge funds have enough capital? A value-at-risk approach," Journal of Financial Economics, Elsevier, vol. 77(1), pages 219-253, July.
  3. Haque, Mahfuzul & Varela, Oscar & Hassan, M. Kabir, 2007. "Safety-first and extreme value bilateral U.S.-Mexican portfolio optimization around the peso crisis and NAFTA in 1994," The Quarterly Review of Economics and Finance, Elsevier, vol. 47(3), pages 449-469, July.
  4. Byström, Hans, 2001. "Extreme Value Theory and Extremely Large Electricity Price Changes," Working Papers 2001:19, Lund University, Department of Economics.
  5. Cristina Sommacampagna, 2002. "Stima del Value-at-Risk con il Filtro di Kalman," Rivista di Politica Economica, SIPI Spa, vol. 92(6), pages 147-174, November-.

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