Extreme Events in Finance

A Handbook of Extreme Value Theory and its Applications

Francois Longin

• Publisher: Wiley
• Year: 2016
• Print ISBN: 9781118650196
• eBook ISBN: 9781118650202
• Edition: 1
• Topic: Business
• Subtopic: Insurance
• Index: Business

A guide to the growing importance of extreme value risk theory, methods, and applications in the financial sector

Presenting a uniquely accessible guide, Extreme Events in Finance: A Handbook of Extreme Value Theory and Its Applications features a combination of the theory, methods, and applications of extreme value theory (EVT) in finance and a practical understanding of market behavior including both ordinary and extraordinary conditions.

Beginning with a fascinating history of EVTs and financial modeling, the handbook introduces the historical implications that resulted in the applications and then clearly examines the fundamental results of EVT in finance. After dealing with these theoretical results, the handbook focuses on the EVT methods critical for data analysis. Finally, the handbook features the practical applications and techniques and how these can be implemented in financial markets. Extreme Events in Finance: A Handbook of Extreme Value Theory and Its Applications includes:

• Over 40 contributions from international experts in the areas of finance, statistics, economics, business, insurance, and risk management
• Topical discussions on univariate and multivariate case extremes as well as regulation in financial markets
• Extensive references in order to provide readers with resources for further study
• Discussions on using R packages to compute the value of risk and related quantities

The book is a valuable reference for practitioners in financial markets such as financial institutions, investment funds, and corporate treasuries, financial engineers, quantitative analysts, regulators, risk managers, large-scale consultancy groups, and insurers. Extreme Events in Finance: A Handbook of Extreme Value Theory and Its Applications is also a useful textbook for postgraduate courses on the methodology of EVTs in finance.

Table of contents

• Cover
• Financial Engineering and Econometrics
• Title Page
• Copyright
• Table of Contents
• About the Editor
• About the Contributors
• Chapter 1: Introduction
• Chapter 2: Extremes Under Dependence—Historical Development and Parallels with Central Limit Theory
• Chapter 3: The Extreme Value Problem in Finance: Comparing the Pragmatic Program with the Mandelbrot Program
• Chapter 4: Extreme Value Theory: An Introductory Overview
• Chapter 5: Estimation of the Extreme Value Index
• Chapter 6: Bootstrap Methods in Statistics of Extremes
• Chapter 7: Extreme Values Statistics for Markov Chains with Applications to Finance and Insurance
• Chapter 8: Lévy Processes and Extreme Value Theory
• Chapter 9: Statistics of Extremes: Challenges and Opportunities
• Chapter 10: Measures of Financial Risk
• Chapter 11: On the Estimation of the Distribution of Aggregated Heavy-Tailed Risks: Application to Risk Measures
• Chapter 12: Estimation Methods for Value at Risk
• Chapter 13: Comparing Tail Risk and Systemic Risk Profiles for Different Types of U.S. Financial Institutions
• Chapter 14: Extreme Value Theory and Credit Spreads
• Chapter 15: Extreme Value Theory and Risk Management in Electricity Markets
• Chapter 16: Margin Setting and Extreme Value Theory
• Chapter 17: The Sortino Ratio and Extreme Value Theory: An Application to Asset Allocation
• Chapter 18: Portfolio Insurance: The Extreme Value Approach Applied to the CPPI Method
• Chapter 19: The Choice of the Distribution of Asset Returns: How Extreme Value Can Help?1
• Chapter 20: Protecting Assets Under Non-Parametric Market Conditions
• Chapter 21: EVT Seen by a Vet: A Practitioner's Experience on Extreme Value Theory
• Chapter 22: The Robotization of Financial Activities: A Cybernetic Perspective
• Chapter 23: Two Tales of Liquidity Stress
• Chapter 24: Managing Operational Risk in the Banking Business – An Internal Auditor Point of View
• Chapter 25: Credo Ut Intelligam
• Chapter 26: Bounded Rationalities, Routines, and Practical as well as Theoretical Blindness: On the Discrepancy Between Markets and Corporations
• Name Index
• Subject Index
• Financial Engineering and Econometrics
• End User License Agreement