Extreme value theory for risk managers using tail-related risk measures

Jean Paul M. Arnaout; Gamze Karayaz; Ariel Pinto

Extreme value theory for risk managers using tail-related risk measures

Jean Paul M. Arnaout
, Gamze Karayaz
, Ariel Pinto

Cybersecurity

University at Albany

Old Dominion University

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › peer-review

Abstract

Many fields of modern science and engineering deal with events that are rare but have significant consequences. Extreme event risk is present in all areas of risk management; one of the greatest challenges of a risk manager is to implement risk management models that allow for rare but damaging events, and permit the measurement of their consequences. The challenge is to model these rare phenomena which mainly lie outside the range of available observations. Extreme value theory (EVT) provides a firm theoretical foundation on which statistical models describing extreme events can be built. Recently, more and more research has been undertaken to analyze the extreme variations that financial markets are subjects to, mostly because of currency crises, stock market crashes, and large credit defaults. This paper discusses how EVT can be applied to model tail-related risk measures such as VaR and expected shortfall.

Original language	English
Title of host publication	27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change
Subtitle of host publication	Managing People and Technology in a Rapidly Changing World, ASEM 2006
Pages	191-195
Number of pages	5
State	Published - 2006
Event	27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006 - Huntsville, AL, United States Duration: Oct 25 2006 → Oct 28 2006

Publication series

Name	27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006

Conference

Conference	27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006
Country/Territory	United States
City	Huntsville, AL
Period	10/25/06 → 10/28/06

Keywords

Expected shortfall
Extreme value theory
Value-at-risk

Cite this

Arnaout, J. P. M., Karayaz, G., & Pinto, A. (2006). Extreme value theory for risk managers using tail-related risk measures. In 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006 (pp. 191-195). (27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006).

Arnaout, Jean Paul M. ; Karayaz, Gamze ; Pinto, Ariel. / Extreme value theory for risk managers using tail-related risk measures. 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006. 2006. pp. 191-195 (27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006).

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title = "Extreme value theory for risk managers using tail-related risk measures",

abstract = "Many fields of modern science and engineering deal with events that are rare but have significant consequences. Extreme event risk is present in all areas of risk management; one of the greatest challenges of a risk manager is to implement risk management models that allow for rare but damaging events, and permit the measurement of their consequences. The challenge is to model these rare phenomena which mainly lie outside the range of available observations. Extreme value theory (EVT) provides a firm theoretical foundation on which statistical models describing extreme events can be built. Recently, more and more research has been undertaken to analyze the extreme variations that financial markets are subjects to, mostly because of currency crises, stock market crashes, and large credit defaults. This paper discusses how EVT can be applied to model tail-related risk measures such as VaR and expected shortfall.",

keywords = "Expected shortfall, Extreme value theory, Value-at-risk",

author = "Arnaout, \{Jean Paul M.\} and Gamze Karayaz and Ariel Pinto",

year = "2006",

language = "English",

isbn = "9781604237146",

series = "27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006",

pages = "191--195",

booktitle = "27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change",

note = "27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006 ; Conference date: 25-10-2006 Through 28-10-2006",

}

Arnaout, JPM, Karayaz, G & Pinto, A 2006, Extreme value theory for risk managers using tail-related risk measures. in 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006. 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006, pp. 191-195, 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006, Huntsville, AL, United States, 10/25/06.

Extreme value theory for risk managers using tail-related risk measures. / Arnaout, Jean Paul M.; Karayaz, Gamze; Pinto, Ariel.
27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006. 2006. p. 191-195 (27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006).

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution › peer-review

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AU - Karayaz, Gamze

AU - Pinto, Ariel

PY - 2006

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N2 - Many fields of modern science and engineering deal with events that are rare but have significant consequences. Extreme event risk is present in all areas of risk management; one of the greatest challenges of a risk manager is to implement risk management models that allow for rare but damaging events, and permit the measurement of their consequences. The challenge is to model these rare phenomena which mainly lie outside the range of available observations. Extreme value theory (EVT) provides a firm theoretical foundation on which statistical models describing extreme events can be built. Recently, more and more research has been undertaken to analyze the extreme variations that financial markets are subjects to, mostly because of currency crises, stock market crashes, and large credit defaults. This paper discusses how EVT can be applied to model tail-related risk measures such as VaR and expected shortfall.

AB - Many fields of modern science and engineering deal with events that are rare but have significant consequences. Extreme event risk is present in all areas of risk management; one of the greatest challenges of a risk manager is to implement risk management models that allow for rare but damaging events, and permit the measurement of their consequences. The challenge is to model these rare phenomena which mainly lie outside the range of available observations. Extreme value theory (EVT) provides a firm theoretical foundation on which statistical models describing extreme events can be built. Recently, more and more research has been undertaken to analyze the extreme variations that financial markets are subjects to, mostly because of currency crises, stock market crashes, and large credit defaults. This paper discusses how EVT can be applied to model tail-related risk measures such as VaR and expected shortfall.

KW - Expected shortfall

KW - Extreme value theory

KW - Value-at-risk

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T3 - 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006

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BT - 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change

T2 - 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006

Y2 - 25 October 2006 through 28 October 2006

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Arnaout JPM, Karayaz G, Pinto A. Extreme value theory for risk managers using tail-related risk measures. In 27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006. 2006. p. 191-195. (27th Annual National Conference of the American Society for Engineering Management 2006 - Managing Change: Managing People and Technology in a Rapidly Changing World, ASEM 2006).

Extreme value theory for risk managers using tail-related risk measures

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Publication series

Conference

Keywords

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