Improving Modeling of Extreme Events using Generalized Extreme Value Distribution or Generalized Pareto Distribution with Mixing Unconditional Disturbances
In this paper an alternative non-parametric historical simulation approach, the Mixing Unconditional Disturbances model with constant volatility, where price paths are generated by reshuffling disturbances for S&P 500 Index returns over the period 1950 - 1998, is used to estimate a Generalized Extreme Value Distribution and a Generalized Pareto Distribution. An ordinary back-testing for period 1999 - 2008 was made to verify this technique, providing higher accuracy returns level under upper bound of the confidence interval for the Block Maxima and the Peak-Over Threshold approaches with Mixing Unconditional Disturbances. This method can be an effective tool to create value for stress-testing valuation.
|Date of creation:||Sep 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
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.:
- Younes Bensalah, 2000. "Steps in Applying Extreme Value Theory to Finance: A Review," Working Papers 00-20, Bank of Canada.
- Manfred Gilli & Evis këllezi, 2006. "An Application of Extreme Value Theory for Measuring Financial Risk," Computational Economics, Society for Computational Economics, vol. 27(2), pages 207-228, May.
- Tompkins, Robert G. & D'Ecclesia, Rita L., 2006. "Unconditional return disturbances: A non-parametric simulation approach," Journal of Banking & Finance, Elsevier, vol. 30(1), pages 287-314, January.
- Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998.
"Pitfalls and Opportunities in the Use of Extreme Value Theory in Risk Management,"
Center for Financial Institutions Working Papers
98-10, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Francis X. Diebold & Til Schuermann & John D. Stroughair, 1998. "Pitfalls and Opportunities in the Use of Extreme Value Theory in Risk Management," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-081, New York University, Leonard N. Stern School of Business-.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:17443. 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: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.