Risk Measurement Using Extreme Values Theory

Proceedings of the 2017 MACI

4 Pages Posted: 28 Apr 2021

See all articles by Sebastian Maio

Sebastian Maio

affiliation not provided to SSRN

pablo macri

affiliation not provided to SSRN

Manuel Maurette

Universidad Torcuato Di Tella - Finance; Universidad del CEMA

Date Written: May 09, 2017

Abstract

Since 2008’s financial crisis, risk management has focused in extreme market movements, i.e. low probability but high impact financial returns. This requires to precisely know the far tails of the probability distribution function underlying the returns’ generation process. Extreme values theory appears in this context as a novel method to estimate that part of the distribution, allowing afterwards different kinds of risk metrics’ calculation. The purpose of this work is studying its methodology and determining if it outperforms traditional methods in numerically generated and market scenarios.

Keywords: Mathematical Finance, Market Risk Measures, Extreme Value Theory

JEL Classification: G12, G13

Suggested Citation

Maio, Sebastian and macri, pablo and Maurette, Manuel, Risk Measurement Using Extreme Values Theory (May 09, 2017). Proceedings of the 2017 MACI, Available at SSRN: https://ssrn.com/abstract=3829785 or http://dx.doi.org/10.2139/ssrn.3829785

Sebastian Maio

affiliation not provided to SSRN

Pablo Macri

affiliation not provided to SSRN

Manuel Maurette (Contact Author)

Universidad Torcuato Di Tella - Finance ( email )

United States

Universidad del CEMA ( email )

Córdoba 374
Buenos Aires, 1044
Argentina

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