Forecasting Extreme Financial Risk

DefaultRisk.com the web's biggest credit risk modeling resource.

Submit Your Paper

Post Your Résumé

For Recruiters

Today's Featured Book

Statistical Analysis of Extreme Values: with Applications to Insurance, Finance, Hydrology and Other Fields, 3rd Ed.
by Rolf-Dieter Reiss, Michael Thomas, Birkhäuser Basel, (July 6, 2007), Paperback, 511 pages

Training Discounted for DefaultRisk.com visitors only:

The Mathematics of Credit Derivatives: The Essential Credit Modelling and Pricing Companion
by Philipp J. Schönbucher,
WBS Training, August 2003, DVD / Interactive CD-ROM

Sponsor:
Shop at Amazon.com and support DefaultRisk.com

Forecasting Extreme Financial Risk

by Kay Giesecke of Cornell University, and
Lisa Goldberg of MSCI Barra

April 11, 2005

Abstract: Extreme value statistics provides a practical, flexible, mathematically elegant framework in which to develop financial risk management tools that are consistent with empirical data. In this introductory survey, we discuss some of the basic tools including power law distributions, the peaks over thresholds estimation procedure and point processes.

Keywords: extreme events, normal distribution, extreme value distribution, power law, Pareto distribution, peaks over thresholds, tail index, shortfall risk, Hurst exponent, clustering, contagion, point process, Poisson process, fitness testing.

Published in: ICFAI Journal of Financial Risk Management, Vol. 3, No. 4, (December 2005), pp. 53-67.

This paper is republished as Ch.23 in…