Measures of financial risks and market crashes.

Novak, Serguei (2007) Measures of financial risks and market crashes. Theory of stochastic processes, 13 (1-2). pp. 182-193. ISSN 0095-7380

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Abstract

The problem of particular importance in financial risk management is forecasting the magnitude of a market crash. We address this problem using statistical inference on heavy–tailed distributions. Our approach involves accurate estimates of the tail index, extreme quantiles, and the mean excess function. We apply our approach to real financial data, and argue that the September 2001 crash had two components: one (systematic) could be predicted, while another (non–systematic) was due to the shock of the event. We present empirical evidence that the degree of tail heaviness can change considerably as one switches to less frequent data. This fact has important implications to the problem of estimating financial risks.

Item Type: Article
Research Areas: A. > School of Science and Technology > Design Engineering and Mathematics
Item ID: 1714
Useful Links:
Depositing User: Repository team
Date Deposited: 25 Mar 2009 13:23
Last Modified: 13 Oct 2016 14:13
URI: http://eprints.mdx.ac.uk/id/eprint/1714

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