The Risk Analysis and Modeling of Byco Petroleum in Pakistan Using Extreme Value Theory

Zishan Ali Syed, Mohammad Mohammad Ahmed Almazah, Zahid Iqbal and Ghulam Raza Khan

Mathematical Problems in Engineering, 2021, vol. 2021, 1-9

Abstract:

The extreme value theory (EVT) has been used to model and measure the distribution of extreme minima of Byco Petroleum in the Pakistan stock market over the period from 2005 to 2012. This paper covers the investigation of distributions that are mostly used in finance including the generalized extreme value (GEV), generalized logistics (GL), and generalized Pareto (GPA) distribution. L-moment ratio diagram is being used to find the appropriate distributions among the distributions. L-moment diagram depicts that GEV and GL distributions are suitable to represent the extremes of Byco Petroleum Pakistan Limited. Thereafter, the probability weighted moment (PWM) method has been used in order to estimate the parameters of probability distributions. Furthermore, Anderson–Darling (AD) goodness-of-fit test is employed to test the goodness of fit among GEV and GL distributions, and it is clear from the results that the GL distribution is more reliable and applicable for extreme minima of Byco Petroleum Company in the Pakistan stock exchange market. EVT and traditional methods are used for value-at-risk (VaR) analysis. The analysis indicates that EVT methods are more suitable for risk measurement in comparison with traditional methods.

Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:hin:jnlmpe:2366469

DOI: 10.1155/2021/2366469

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