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Extreme Market Risk - An Extreme Value Theory Approach, David E. Allen, Abhay K. Singh, Robert J. Powell
Extreme Market Risk - An Extreme Value Theory Approach, David E. Allen, Abhay K. Singh, Robert J. Powell
Research outputs 2011
The phenomenon of the occurrence of rare yet extreme events, “Black Swans” in Taleb’s terminology, seems to be more apparent in financial markets around the globe. This means there is not only a need to design proper risk modelling techniques which can predict the probability of risky events in normal market conditions but also a requirement for tools which can assess the probabilities of rare financial events; like the recent Global Financial Crisis (2007-2008). An obvious candidate, when dealing with extreme financial events and the quantification of extreme market risk is Extreme Value Theory (EVT). This proves to be a …
Value At Risk Estimation Using Extreme Value Theory, Abhay K. Singh, David E. Allen, Robert J. Powell
Value At Risk Estimation Using Extreme Value Theory, Abhay K. Singh, David E. Allen, Robert J. Powell
Research outputs 2011
A common assumption in quantitative financial risk modelling is the distributional assumption of normality in the asset’s return series, which makes modelling easy but proves to be inefficient if the data exhibit extreme tails. When dealing with extreme financial events like the Global Financial Crisis of 2007-2008 while quantifying extreme market risk, Extreme Value Theory (EVT) proves to be a natural statistical modelling technique of interest. Extreme Value Theory provides well established statistical models for the computation of extreme risk measures like the Return Level, Value at Risk and Expected Shortfall. In this paper we apply Univariate Extreme Value Theory …