Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
}
TY - JOUR
T1 - Extreme Value Dependence in Financial Markets: Diagnostics, Models, and Financial Implications.
AU - Poon, Ser-Huang;
AU - Rockinger, Michael;
AU - Tawn, Jonathan
PY - 2004
Y1 - 2004
N2 - This article presents a general framework for identifying and modeling the joint-tail distribution based on multivariate extreme value theories. We argue that the multivariate approach is the most efficient and effective way to study extreme events such as systemic risk and crisis. We show, using returns on five major stock indices, that the use of traditional dependence measures could lead to inaccurate portfolio risk assessment. We explain how the framework proposed here could be exploited in a number of finance applications such as portfolio selection, risk management, Sharpe ratio targeting, hedging, option valuation, and credit risk analysis.
AB - This article presents a general framework for identifying and modeling the joint-tail distribution based on multivariate extreme value theories. We argue that the multivariate approach is the most efficient and effective way to study extreme events such as systemic risk and crisis. We show, using returns on five major stock indices, that the use of traditional dependence measures could lead to inaccurate portfolio risk assessment. We explain how the framework proposed here could be exploited in a number of finance applications such as portfolio selection, risk management, Sharpe ratio targeting, hedging, option valuation, and credit risk analysis.
U2 - 10.1093/rfs/hhg058
DO - 10.1093/rfs/hhg058
M3 - Journal article
VL - 17
SP - 581
EP - 610
JO - Review of Financial Studies
JF - Review of Financial Studies
SN - 1465-7368
IS - 2
ER -