Extreme Volatilities, Financial Crises and L-Moment Estimations of Tail Indexes

108 Pages Posted: 28 Oct 2008 Last revised: 26 Apr 2010

See all articles by Bertrand B. Maillet

Bertrand B. Maillet

EMLyon Business School (Paris Campus)

Jean-Philippe Medecin

CES/CNRS - University of Paris-1 (Panthéon-Sorbonne)

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Date Written: January 12, 2009


Following Bali and Weinbaum (2005) and Maillet et al. (2008), we present several estimates of volatilities computed with high- and low-frequency data and complement their results using additional measures of risk and several alternative methods for tail-index estimation. The aim is here to confirm previous results regarding the slope of the tail of various risk measure distributions, in order to define the high watermarks of market risks. We also produce synthetic general results concerning the method of estimation of the tail- indexes related to expressions of the L-moments. Based on estimates of tail indexes, backed-out from the high frequency 30' sampled CAC40 French stock Index series on the period 1997-2006, using Non-parametric Generalized Hill, Maximum Likelihood and various kinds of L-moment Methods for the estimation of both a Generalized Extreme Value density and a Generalized Pareto Distribution, we confirm that a heavy-tail density specification of the Log-volatility is not necessary.

Keywords: Financial Crisis, Realized Volatility, Range-based Volatility, Extreme Value Distributions, Tail Index, L-moments, High Frequency Data

JEL Classification: G10, G14

Suggested Citation

Maillet, Bertrand B. and Medecin, Jean-Philippe, Extreme Volatilities, Financial Crises and L-Moment Estimations of Tail Indexes (January 12, 2009). Available at SSRN: https://ssrn.com/abstract=1288661 or http://dx.doi.org/10.2139/ssrn.1288661

Bertrand B. Maillet (Contact Author)

EMLyon Business School (Paris Campus) ( email )

23 Avenue Guy de Collongue
Ecully, 69132

Jean-Philippe Medecin

CES/CNRS - University of Paris-1 (Panthéon-Sorbonne) ( email )

106 bv de l'Hôpital
Paris, 75013

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