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Modelling Catastrophic Risk in International Equity Markets: An Extreme Value Approach

  • John Cotter

    (University College Dublin, Ireland)

This letter uses the Block Maxima Extreme Value approach to quantify catastrophic risk in international equity markets. Risk measures are generated from a set threshold of the distribution of returns that avoids the pitfall of using absolute returns for markets exhibiting diverging levels of risk. From an application to leading markets, the letter finds that the Nikkei is more prone to catastrophic risk than the FTSE and Dow Jones Indexes.

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Paper provided by Geary Institute, University College Dublin in its series Working Papers with number 200515.

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Length: 14 pages
Date of creation: 24 Jun 2011
Date of revision:
Handle: RePEc:ucd:wpaper:2005/15
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  1. John Cotter & Donal G. McKillop, 2000. "The Distributional Characteristics of a Selection of Contracts Traded on the London International Financial Futures Exchange," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 27(3&4), pages 487-510.
  2. John Cotter, 2011. "Tail Behaviour of the Euro," Papers 1103.5418,
  3. Cotter, John, 2004. "Downside Risk for European Equity Markets," MPRA Paper 3537, University Library of Munich, Germany.
  4. Longin, Francois M., 2000. "From value at risk to stress testing: The extreme value approach," Journal of Banking & Finance, Elsevier, vol. 24(7), pages 1097-1130, July.
  5. John Cotter, 2005. "Extreme risk in futures contracts," Applied Economics Letters, Taylor & Francis Journals, vol. 12(8), pages 489-492.
  6. Hans Dewachter & Geert Gielens, 1999. "Setting futures margins: the extremes approach," Applied Financial Economics, Taylor & Francis Journals, vol. 9(2), pages 173-181.
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