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Empirrcal analysis of value-at-risk estimation methods using extreme value theory

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2 Author(s)
Zhan Yuanrui ; School of Management, Finance Center, Tianjin University, 300072, P. R. China ; Tian Hongwei

This paper investigates methods of value-at-risk (VaR) estimation using extreme value theory (EVT). It compares two different estimation methods, “two-step subsample bootstrap” based on moment estimation and maximum likelihood estimation (MLE), according to their theoretical bases and computation procedures. Then, the estimation results are analyzed together with those of normal method and empirical method. The empirical research of foreign exchange data shows that the EVT methods have good characters in estimating VaR under extreme conditions and “two-step subsample bootstrap” method is preferable to MLE.

Published in:

Journal of Systems Engineering and Electronics  (Volume:12 ,  Issue: 1 )