Pitfalls and Opportunities in the Use of Extreme Value Theory in Risk Management
Recent literature has trumpeted the claim that extreme value theory (EVT) holds promise for accurate estimation of extreme quantiles and tail probabilities of financial asset returns, and hence hold promise for advances in the management of extreme financial risks. Our view, based on a disinterested assessment of EVT from the vantage point of financial risk management, is that the recent optimism is partly appropriate but also partly exaggerated, and that at any rate much of the potential of EVT remains latent. We substantiate this claim by sketching a number of pitfalls associate with use of EVT techniques. More constructively, we show how certain of the pitfalls can be avoided, and we sketch a number of explicit research directions that will help the potential of EVT to be realized.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Mar 1998|
|Contact details of provider:|| Postal: U.S.A.; New York University, Leonard N. Stern School of Business, Department of Economics . 44 West 4th Street. New York, New York 10012-1126|
Phone: (212) 998-0100
Web page: http://w4.stern.nyu.edu/finance/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Diebold & Lopez, "undated".
"Modeling Volatility Dynamics,"
_062, University of Pennsylvania.
- Francis X. Diebold & Jose A. Lopez, 1995. "Modeling volatility dynamics," Research Paper 9522, Federal Reserve Bank of New York.
- Einmahl, J.H.J., 1990. "The empirical distribution function as a tail estimator," Other publications TiSEM 08014dbd-2d84-43e5-ad47-7, Tilburg University, School of Economics and Management.
- Jón Daníelsson & Casper G. de Vries, 1998. "Beyond the Sample: Extreme Quantile and Probability Estimation," Tinbergen Institute Discussion Papers 98-016/2, Tinbergen Institute.
- Jon Danielsson & Casper G. de Vries, 1998. "Beyond the Sample: Extreme Quantile and Probability Estimation," FMG Discussion Papers dp298, Financial Markets Group.
- Bollerslev, Tim & Chou, Ray Y. & Kroner, Kenneth F., 1992. "ARCH modeling in finance : A review of the theory and empirical evidence," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 5-59.
- Engle, Robert F & Gonzalez-Rivera, Gloria, 1991. "Semiparametric ARCH Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(4), pages 345-359, October. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:fth:nystfi:98-081. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Thomas Krichel)
If references are entirely missing, you can add them using this form.