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Measuring Market Risk Using Extreme Value Theory: An Empirical Study Using South African Rand/Dollar One-Year Futures Contract


  • Shahiem Ganief
  • Nicholas Biekpe

    () (University of Stellenbosch Business School)


Extreme events in financial markets are central issues in finance and particularly in risk management and financial regulation. Value at Risk and Expected Shortfall emerged as standard tools for measuring market risk. However, no consensus has yet been reach as to the best method to implement these measures. All conventional methods have significant shortfalls. Extreme Value Theory (EVT) provides a natural approach to the calculation of extreme market risk. The aim of the paper is to illustrate the use of the peaks-over-threshold method of EVT to measure extreme market risk. The technique will be applied to the South African Rand/Dollar One Year Futures Contract.

Suggested Citation

  • Shahiem Ganief & Nicholas Biekpe, 2003. "Measuring Market Risk Using Extreme Value Theory: An Empirical Study Using South African Rand/Dollar One-Year Futures Contract," The African Finance Journal, Africagrowth Institute, vol. 5(1), pages 68-86.
  • Handle: RePEc:afj:journl:v:5:y:2003:i:1:p:68-86

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C45 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Neural Networks and Related Topics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets


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