GARCH with generalized Pareto tail

2021 ◽  
Vol 2 (1) ◽  
pp. 37-80
Author(s):  
Hiroyuki Kawakatsu
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Heavy Tail ◽  
Conditional Heteroskedasticity ◽  
Return Distribution ◽  
Tail Risk ◽  
Asset Return ◽  
Generalized Pareto ◽  
Estimated Parameters ◽  
Pareto Tail

Abstract This paper proposes the use of a spliced distribution with generalized Pareto tail for financial risk management. The proposed distribution is tailored to flexibly capture the heavy tail in asset return distribution. The parameters of the distribution can be estimated jointly with a conditional heteroskedasticity model. The estimated parameters can then be used to produce tail risk forecasts for risk management purposes. The use of the proposed distribution is illustrated by evaluating tail risk forecasts for a number of major stock indices.

TWO-COMPONENT EXTREME VALUE DISTRIBUTION FOR ASIA-PACIFIC STOCK INDEX RETURNS

2006 ◽  
Vol 09 (05) ◽  
pp. 643-671 ◽  
Author(s):  
THIERRY ANÉ
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Goodness Of Fit ◽  
Extreme Value Distribution ◽  
Value Theory ◽  
Extreme Value ◽  
Stock Index ◽  
Asia Pacific ◽  
Asset Return ◽  
Two Component

Financial risk management typically deals with low-probability events in the tails of asset return distributions. To better capture the behavior of these tails, several studies have clearly highlighted that one should rely on a methodology that directly focuses on the tails of the distribution rather than getting the tails as an outcome of modelling the entire density function. Traditional Extreme Value Theory (EVT) distributions, however, provide a good fit for the bulk of the extreme data but usually underestimate a small amount of observations considered as "outliers". Since the main objective of risk management analysis is to estimate the size and probability of very large price movements, these "outliers" are by definition the very events we need to investigate. In this paper we suggest the use of a Two-Component Extreme Value (TCEV) distribution where a 'basic distribution' generates ordinary extremes (more frequent and less severe in the mean) while an "outlying distribution" generates rarer but severe extremes. Goodness-of-fit tests show the superiority of this distribution to capture the extremes of eleven MSCI Indices of the Pacific-Basin region relative to traditional EVT densities. Measures of accuracy and efficiency used to assess the performance of VaR forecasts also indicate that the additional flexibility brought by the TCEV model provides strong improvements for risk management.

FINANCIAL RISK MANAGEMENT IN ENTREPRENEURIAL ACTIVITY: CONCEPT, SYSTEM AND PRINCIPLE OF BUILDING

2020 ◽  
Vol 2 (4) ◽  
pp. 62-67
Author(s):  
M. M. KHAYTANOVA ◽  
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Entrepreneurial Activity ◽  
Financial Risks ◽  
Study Methods ◽  
Financial Risk Management ◽  
Concept System

The article reveals: theoretical justifications of the concept of “financial risk” in relation to the sphere of entrepreneurship; methods for its identification and processing. Financial risk management is the activity of identification, assessment, control and monitoring of risks. In the course of the study, methods for managing financial risks in entrepreneurial activity and their classification were identified.

Effect of Financial Risk Management on the Performance of Insurance Companies in Rwanda (2015-2019)

2020 ◽  
Author(s):  
Simon Pierre NTIVUGURUZWA ◽  
Jean Bosco Ndikubwimana ◽  
Dukunde Angelique ◽  
JMV MPIRANYA ◽  
Frederic Mpambara ◽  
...  
Keyword(s):  
Risk Management ◽  
Financial Risk ◽  
Insurance Companies ◽  
Financial Risk Management

Risk Management Optimization for Sovereign Debt Restructuring

2015 ◽  
Vol 6 (2) ◽  
Author(s):  
Andrea Consiglio ◽  
Stavros A. Zenios
Keyword(s):  
Risk Management ◽  
Scenario Analysis ◽  
Sovereign Debt ◽  
Risk Measure ◽  
Policy Tools ◽  
Debt Restructuring ◽  
Tail Risk ◽  
Debt Sustainability ◽  
Scenario Optimization ◽  
Management Optimization

AbstractDebt restructuring is one of the policy tools available for resolving sovereign debt crises and, while unorthodox, it is not uncommon. We propose a scenario analysis for debt sustainability and integrate it with scenario optimization for risk management in restructuring sovereign debt. The scenario dynamics of debt-to-GDP ratio are used to define a tail risk measure, termed

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