Crashes, crises and collapses were until recently rare events in the finance markets. Huge swings in the markets were one-off events and not considered a threat, so risk management traditionally concentrated on smaller fluctuations in the market. The purpose of this book is to present extreme value theory (EVT) and its application in finance, particularly in risk management, to show that extreme financial events can be modelled. This volume illustrates how EVT can be applied to financial problems by providing an overview of the classical method and then applying the extreme value method.
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Für höhere Schule und Studium
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ISBN-13
978-0-471-86640-4 (9780471866404)
Schweitzer Klassifikation
Introduction. Motivation Part I: Extreme Value Theory Chapter 1: Univariate extreme value theory Definitions of univariate extremes The timing of univariate extremes The univariate distribution of extremes Estimation procedures and empirical results Chapter 2: Extreme events on Wall Street Volatility in financial markets Characterisation of a stock market crash Estimating the probability of a market crash Chapter 3: Multivariate extreme value theory Ambiguity in the definition of multivariate extremes The multivariate distribution of extremes Estimation procedures and empirical results Chapter 4: Contagion in financial markets Linkages between financial markets Correlation during volatile periods Implications for portfolio management Part II: Applications in Risk Management Chapter 5: Financial regulation Regulation interest: volatility, fat tails and systemic risk Contribution of extreme value theory Chapter 6: Value at risk Classical methods VaR and extreme values The extreme value approach Assessment of the regulation on market risks Beyond the VaR Chapter 7: Catastrophe scenarios and stress testing VaR and stress testing Definition of catastrophe scenarios Ordering of extreme events Chapter 8: Portfolio management Portfolio performance and market crashes Insurance against crises: crash options Chapter 9: Risk management in derivatives markets Safety mechanisms in derivatives markets Optimal settings of margins, price limits and capital requirements Conclusion References Index.
