Small-Samples and EVT Estimators for Computing Risk Measures: Simulation and Empirical Evidences

THE RISK MODELING EVALUATION HANDBOOK, McGraw-Hill, pp. 339-361, 2010

Posted: 11 May 2010

See all articles by Alexander Kudrov

Alexander Kudrov

National Research University Higher School of Economics

Dean Fantazzini

Moscow School of Economics, Moscow State University; National Research University Higher School of Economics

Date Written: May 9, 2010

Abstract

Extreme Value Theory (EVT) deals with the analysis of rare events and it has been recently used in finance to predict the occurrence of such events, or, at least, to build more robust models for unexpected extreme events. Particularly, EVT has been used to model the loss severities in Operational Risk management, while the use of GARCH-EVT models has gained popularity when computing the Value at Risk (or other risk measures) in Market Risk management. To date, little attention has been devoted to the analysis of the small-sample properties of EVT estimators and their effects on the computation of financial risk measures. In this work we present and discuss the results of a Monte Carlo study of the small sample properties of these estimators in an Operational Risk setting, together with an empirical analysis dealing with Market Risk management.

Keywords: EVT, Extreme Value Theory, VaR, Expected Shortfall, GARCH, Small Sample, Small Sample Properties, Market Risk, Operational Risk

JEL Classification: C15, C32, G17, G32

Suggested Citation

Kudrov, Alexander and Fantazzini, Dean, Small-Samples and EVT Estimators for Computing Risk Measures: Simulation and Empirical Evidences (May 9, 2010). THE RISK MODELING EVALUATION HANDBOOK, McGraw-Hill, pp. 339-361, 2010 . Available at SSRN: https://ssrn.com/abstract=1603543

Alexander Kudrov

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

Dean Fantazzini (Contact Author)

Moscow School of Economics, Moscow State University ( email )

GSP-2, Leninskie Gory
Moscow, 119992
Russia
+7 495 5105256 (Phone)
+7 495 5105267 (Fax)

HOME PAGE: https://sites.google.com/site/deanfantazzini/

National Research University Higher School of Economics ( email )

Myasnitskaya street, 20
Moscow, Moscow 119017
Russia

HOME PAGE: http://www.hse.ru/org/persons/11532644

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