Estimation of tail‐related risk measures in the Indian stock market: An extreme value approach |
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Authors: | Madhusudan Karmakar |
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Institution: | Indian Institute of Management, Prabandh Nagar, Off Sitapur Road, Lucknow, 226 013 UP, India |
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Abstract: | The purpose of the study is to estimate tail-related risk measures using extreme value theory (EVT) in the Indian stock market. The study employs a two stage approach of conditional EVT originally proposed by McNeil and Frey (2000) to estimate dynamic Value at Risk (VaR) and expected shortfall (ES). The dynamic risk measures have been estimated for different percentiles for negative and positive returns. The estimates of risk measures computed under different quantile levels exhibit strong stability across a range of the selected thresholds, implying the accuracy and reliability of the estimated quantile based risk measures. |
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Keywords: | C15 G1 Extreme value theory Peak over threshold method GARCH Value at Risk Expected shortfall |
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