Crisis, Value at Risk and Conditional Extreme Value Theory via the NIG + Jump Model : WestminsterResearch

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Title	Crisis, Value at Risk and Conditional Extreme Value Theory via the NIG + Jump Model
Type	Journal article
Authors	Ze-To, S.
Abstract	This study develops a new conditional extreme value theory-based model (EVT) combined with the NIG + Jump model to forecast extreme risks. This paper utilizes the NIG + Jump model to asymmetrically feedback the past realization of jump innovation to the future volatility of the return distribution and uses the EVT to model the tail distribution of the NIG + Jump-processed residuals. The model is compared to the GARCH-t model and NIG + Jump model to evaluate its performance in estimating extreme losses in three major market crashes and crises. The results show that the conditional EVT-NIG + Jump model outperforms the GARCH and GARCH-t models in depicting the non-normality and in pro- viding accurate VaR forecasts in the in-sample and out-sample tests. The EVT-NIG + Jump model, which can measure the volatility of extreme price movement in capital markets due to unexpected events, enhances the EVT-based model for measuring the tail risk.
Keywords	Value-at-Risk
	Extreme Value Theory
	Jump
	NIG
Journal	Journal of Mathematical Finance
Journal citation	2 (3), pp. 225-237
ISSN	2162-2434
	2162-2442
Year	2012
Publisher	Scientific Research
Digital Object Identifier (DOI)	https://doi.org/10.4236/jmf.2012.23025
Published	Aug 2012

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Crisis, Value at Risk and Conditional Extreme Value Theory via the NIG + Jump Model

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