Application of Modified POT Method with Volatility Model for Estimation of Risk Measures
DOI:
https://doi.org/10.12775/DEM.2009.012Keywords
Extreme Value Theory, Peaks over Threshold, Value-at-Risk, Expected ShortfallAbstract
The main aim of this paper is the presentation and empirical analysis of the new approach which combines volatility models with Peaks over Threshold method that comes from extreme value theory. The new approach is applied for estimation of risk measures (VaR and ES) in financial time series. For the empirical analysis the financial risk model evaluation was conducted. In this paper the POT method was compared with standard volatility models (GARCH and SV) in case of the conditional modeling.
References
Alexander, C. (2008), Market Risk Analysis vol. IV: Value-at-Risk Models, John Wiley & Sons Ltd., New York.
Angelidis, T., Degiannakis, S. (2006), Backtesting VaR Models: An Expected Shortfall Approach, Working Papers, University of Crete, Athens University of Economics and Business.
Artzner, P., Delbaen, F., Eber, J. M., Heath, D. (1997), Thinking Coherently, Risk, 10, 68–71.
Artzner, P., Delbaen F., Eber J.M., Heath, D. (1999), Coherent Measures of Risk, Mathematical Finance, 9, 203–228. DOI: http://dx.doi.org/10.1111/1467-9965.00068
Brooks, C., Clare, A.D., Dalle Molle, J.W, Persand, G. (2006), A Comparison of Extreme Value Theory Approaches for Determining Value at Risk, Journal of Empirical Finance, 12, 339–352.
Christoffersen, P.F. (1998), Evaluating Interval Forecasts, International Economic Review, 3. DOI: http://dx.doi.org/10.2307/2527341
Dowd, K. (2005), Measuring Market Risk Second Edition, John Wiley & Sons Ltd., New York.
Embrechts, P., Klüppelberg, C., Mikosch, T. (2003), Modelling Extremal Events for Insurance and Finance, Springer, Berlin.
Fałdziński, M. (2008), Model warunkowej zmienności wartości ekstremalnych (Conditional Extreme Value Volatility model), in Zieliński Z. (ed.), Współczesne trendy w ekonometrii (Contemporary Trends in Econometrics), Wydawnictwo Wyższej Szkoły Informatyki i Ekonomii, Olsztyn.
Fałdziński, M. (2009), On The Empirical Importance Of The Spectral Risk Measure With Extreme Value Theory Approach, Forecasting Financial Markets and Economic Decision-Making FindEcon, Łódź, submitted.
Haas, M. (2001), New Methods in Backtesting, Financial Engineering Research Center, Bonn.
Harmantzis, F.C., Miao, L., Chien, Y. (2006), Empirical Study of Value-at-Risk and Expected Shortfall Models with Heavy Tails, Journal of Risk Finance, 7, No.2, 117–126.
Kuester, K., Mittnik, S., Paolella, M.S. (2006), Value-at-Risk Prediction: A Comparison of Alternative Strategies, Journal of Financial Econometrics, 1, 53–89. DOI: http://dx.doi.org/10.1093/jjfinec/nbj002
McNeil, J.A., Frey, F. (2000), Estimation of Tail-Related Risk Measures for Heteroscedastic Financial Time Series: an Extreme Value Approach, Journal of Empirical Finance, 7, 271–300.
Osińska, M., Fałdziński, M. (2008), GARCH and SV models with application of Extreme Value Theory, in Zieliński Z. (ed.), Dynamic Econometric Models, Volume 8, UMK, Toruń.
Szegö, G. (2004), Risk measures for the 21st century, John Wiley & Sons Ltd., West Sussex, UK.
Downloads
Published
How to Cite
Issue
Section
License
The journal provides an Open Access to its content based on the non-exclusive licence Creative Commons (CC BY-ND 4.0).
To enable the publisher to disseminate the author's work to the fullest extent, the author must agrees to the terms and conditions of the License Agreement with Nicolaus Copernicus University.
Stats
Number of views and downloads: 312
Number of citations: 0