Adapting extreme value statistics to financial time series: dealing with bias and serial dependence

Laurens Haan (), Cécile Mercadier () and Chen Zhou ()
Additional contact information
Laurens Haan: Erasmus University Rotterdam
Cécile Mercadier: Université Claude Bernard—Lyon 1

Finance and Stochastics, 2016, vol. 20, issue 2, No 2, 354 pages

Abstract: Abstract We handle two major issues in applying extreme value analysis to financial time series, bias and serial dependence, jointly. This is achieved by studying bias correction methods when observations exhibit weak serial dependence, in the sense that they come from β $\beta$ -mixing series. For estimating the extreme value index, we propose an asymptotically unbiased estimator and prove its asymptotic normality under the β $\beta$ -mixing condition. The bias correction procedure and the dependence structure have a joint impact on the asymptotic variance of the estimator. Then we construct an asymptotically unbiased estimator of high quantiles. We apply the new method to estimate the value-at-risk of the daily return on the Dow Jones Industrial Average index.

Keywords: Hill estimator; Bias correction; β $\beta$ -mixing condition; Tail quantile process; 62G32; 60G70 (search for similar items in EconPapers)
JEL-codes: C14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Downloads: (external link)
http://link.springer.com/10.1007/s00780-015-0287-6 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:finsto:v:20:y:2016:i:2:d:10.1007_s00780-015-0287-6

Ordering information: This journal article can be ordered from
http://www.springer. ... ance/journal/780/PS2

DOI: 10.1007/s00780-015-0287-6

Access Statistics for this article

Finance and Stochastics is currently edited by M. Schweizer

More articles in Finance and Stochastics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().