Abstract:This paper uses the generalised extreme value (GEV) distribution to model the extreme losses that are likely to occur during market crashes, in the case of an investor who has long positions in stocks and currencies. The null hypothesis -which tests for normality of asset returns -is rejected due to asymmetry of these returns. We assume that the asymmetric behaviour and volatility of the returns are captured by the shape and scale parameters, respectively, of a GEV distribution. The data set includes stock ind… Show more
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