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After completing this reading you should be able to:
- Explain the importance and challenges of extreme values in risk management.
- Describe extreme value theory (EVT) and its use in risk management.
- Describe the peaks-over-threshold (POT) approach.
- Compare and contrast generalized extreme value and POT.
- Evaluate the tradeoffs involved in setting the threshold level when applying the generalized Pareto (GP) distribution.
- Explain the importance of multivariate EVT for risk management
0:00 Introduction
2:31 Learning Objectives
3:45 What are Extreme Values?
4:47 Challenges of Extreme Values
7:11 Extreme Value Theory (EVT) in Finance
9:54 Illustrating Block Maxima
11:36 Cases of the GEV Distribution
12:56 Standardized Fréchet and Gumbel Probability Density Functions
15:19 Interpreting GEV Quantiles
15:57 Gumbel and Fréchet VaR
18:48 The Peaks-Over-Threshold (POT) Approach
22:49 What Happens as u Gets Large?
24:42 VaR and Expected Shortfall
25:36 Importance of Multivariate EVT for Risk Management
22 июл 2024
