Where is the distribution tail threshold? A tale on tail and copulas in financial risk measurement

González-Sánchez, Mariano y Nave Pineda, Juan M. . (2023) Where is the distribution tail threshold? A tale on tail and copulas in financial risk measurement. International Review of Financial Analysis, Volume 86, March 2023, 102512

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Título Where is the distribution tail threshold? A tale on tail and copulas in financial risk measurement
Autor(es) González-Sánchez, Mariano
Nave Pineda, Juan M.
Materia(s) Economía
Abstract Estimating the market risk is conditioned by the fat tail of the distribution of returns. But the tail index depends on the threshold of this distribution fat tail. We propose a methodology based on the decomposition of the series into positive outliers, Gaussian central part and negative outliers and uses the latter to estimate this cutoff point. Additionally, from this decomposition, we estimate extreme dependence correlation matrix which is used in the measurement of portfolio risk. For a sample consisting of six assets (Bitcoin, Gold, Brent, Standard&Poor-500, Nasdaq and Real Estate index), we find that our methodology presents better results, in terms of normality and volatility of the tail index, than the Kolmogorov–Smirnov distance, and its unnecessary capital consumption is lower. Also, in the measurement of the risk of a portfolio, the results of our proposal improve those of a t-Student copula and allow us to estimate the extreme dependence and the corresponding indexes avoiding the implicit restrictions of the elliptic and Archimedean copulas.
Palabras clave Tail index
Fat tail
Extreme dependence
Confidence level
Editor(es) Elsevier
Fecha 2023
Formato application/pdf
Identificador bibliuned:DptoEEC-FCEE-Articulos-Mgonzalez-0001
http://e-spacio.uned.es/fez/view/bibliuned:DptoEEC-FCEE-Articulos-Mgonzalez-0001
DOI - identifier https://doi.org/10.1016/j.irfa.2023.102512
ISSN - identifier 1057-5219
Nombre de la revista International Review of Financial Analysis
Número de Volumen 86
Publicado en la Revista International Review of Financial Analysis, Volume 86, March 2023, 102512
Idioma eng
Versión de la publicación publishedVersion
Tipo de recurso Article
Derechos de acceso y licencia http://creativecommons.org/licenses/by-nc-nd/4.0
info:eu-repo/semantics/openAccess
Tipo de acceso Acceso abierto
Notas adicionales The registered version of this article, first published in International Review of Financial Analysis, is available online at the publisher's website: Elsevier, https://doi.org/10.1016/j.irfa.2023.102512
Notas adicionales La versión registrada de este artículo, publicado por primera vez en International Review of Financial Analysis, está disponible en línea en el sitio web del editor: Elsevier, https://doi.org/10.1016/j.irfa.2023.102512

 
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Creado: Fri, 12 Jan 2024, 00:59:51 CET