Naslov
Modelling extreme events: Application to Zagreb stock exchange

Autori
Žiković, Saša ; Pečarić, Mario

Vrsta, podvrsta i kategorija rada
Radovi u zbornicima skupova, cjeloviti rad (in extenso), znanstveni

Skup
Eighth International Conference on “ Challenges of Europe”

Mjesto i datum
Split, Hrvatska, 21.05.2009. - 24.05.2009

Vrsta sudjelovanja
Predavanje

Vrsta recenzije
Međunarodna recenzija

Ključne riječi
Extreme value theory; Generalised Pareto distribution; Value at Risk; Emerging markets; Zagreb stock exchange

Sažetak
In the paper we analyse the performance of Value at Risk (VaR) models at extreme quantiles: 0.99, 0.995 and 0.999 for both long and short positions in Croatian, Zagreb stock exchange index - CROBEX. Backtesting shows that none of the usually employed VaR models correctly forecasts the risk during the ongoing global financial crisis. The only exceptions are the extreme value based models which correctly forecast the true level of upside and downside risk. We also investigate the closeness of fit of theoretical distributions to the extreme tails of CROBEX returns. Results show that generalised Pareto distribution, which has a sound theoretical foundation, provides the best fit to both tails of CROBEX returns. We find that distribution tails differ significantly, with the right tail having a higher tail index, indicative of more extreme events.

Izvorni jezik
Engleski

Znanstvena područja
Ekonomija

POVEZANOST RADA