Modeling Tail Behavior with Extreme Value Theory, Risk Management



Reading Source:

Topics Covered in this Reading:

  • Model Backlash
  • Extreme Value Theory
  • The Distribution of Excesses
  • Modeling with a Hybrid Empirical/GPD Model
  • The Choice of the Threshold Value
  • Example: Modeling Monthly Total Returns for A-Rated 7-10 Year Corporate Bonds
  • Key Model Results
  • Conclusions