Determination of risk in financial markets using Extreme Value Theory (EVT)

Ionuț Daniel Pop
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Ionuț Daniel Pop: Bucharest University of Economic Studies, Romania

Theoretical and Applied Economics, 2015, vol. XXII, issue Special(II), 246-252

Abstract: Financial Markets represents a financing source for public and private entities. The last crush of the banking system encourages the investors to be part of the capital markets and companies to be more flexible with their shares on stock exchange. In the last years, financial dates have been analyzed and its returns presented some characteristics like: leptokurtosis, serial dependence and fat – tailedness. Risk management is very important for both investors and companies. For that reason, risk managers and supervisors used the Value at Risk (VaR) to measure the losses for buying/selling position. Extreme Value Theory (EVT) is a complementary risk management tool that presents how the heavy tails can be used to allocate the capital for covering the risks. In this paper I present the evolution of literature about risk management in financial markets and how EVT is used to measure the risks using different models.

Keywords: financial markets; Extreme Value Theory; risk management; Value at Risk; BASEL agreement. (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:agr:journl:v:xxii:y:2015:i:special(ii):p:246-252

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