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The new hybrid value at risk approach based on the extreme value theory

Author

Listed:
  • Nikola Radivojevic
  • Milena Cvjetkovic
  • Saša Stepanov

    ()

Abstract

In this paper the authors introduce a new hybrid approach based on the Extreme Value Theory (EVT) to joint estimation of Value at Risk (VaR) and Expected Shortfall (ES) for high quantiles of return distributions. The approach is suitable for measuring market risk in the emerging markets. It is designed to capture the empirical features of returns with emerging markets, such as leptokurtosis, asymmetry, autocorrelation and heteroscedasticity.

Suggested Citation

  • Nikola Radivojevic & Milena Cvjetkovic & Saša Stepanov, 2016. "The new hybrid value at risk approach based on the extreme value theory," Estudios de Economia, University of Chile, Department of Economics, vol. 43(1 Year 20), pages 29-52, June.
  • Handle: RePEc:udc:esteco:v:43:y:2016:i:1:p:17-43
    as

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    File URL: http://www.econ.uchile.cl/uploads/publicacion/c89d0fb33bf1b05870a6f0167ce8373af470de58.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Value at Risk; Extreme Value Theory; Expected Shortfall; emerging markets; market risk.;

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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