Modeling Tail Risk with Tempered Stable Distributions: An Overview

50 Pages Posted: 3 Dec 2018

See all articles by Hasan Fallahgoul

Hasan Fallahgoul

Monash University

Gregoire Loeper

Monash University - School of Mathematical Sciences; BNP Paribas

Date Written: November 8, 2018

Abstract

This paper investigates the performance of different parametric models, stable and tempered stable distributions, for capturing the tail behaviour of the log-returns. We first define and discuss the properties of the stable and tempered stable random variables. We then show how to estimate their parameters and simulate them from their characteristic functions. Finally, as an illustration, we perform an empirical experiment to explore the performance of different models representing the distribution of log-returns for the S&P500 and DAX indexes

Keywords: tail risk, stable distribution, tempered stable distribution, Lévy processes

Suggested Citation

Fallahgoul, Hasan A and Loeper, Gregoire, Modeling Tail Risk with Tempered Stable Distributions: An Overview (November 8, 2018). Available at SSRN: https://ssrn.com/abstract=3274469 or http://dx.doi.org/10.2139/ssrn.3274469

Hasan A Fallahgoul (Contact Author)

Monash University ( email )

Clayton Campus
Victoria, 3800
Australia

HOME PAGE: http://www.hfallahgoul.com

Gregoire Loeper

Monash University - School of Mathematical Sciences ( email )

Clayton Campus
Victoria, 3800
Australia

BNP Paribas ( email )

Paris
France

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
24
Abstract Views
264
PlumX Metrics