Related papers: Superstatistics with cut-off tails for financial t…
A geometric representation for multivariate extremes, based on the shapes of scaled sample clouds in light-tailed margins and their so-called limit sets, has recently been shown to connect several existing extremal dependence concepts.…
The most popular approach in extreme value statistics is the modelling of threshold exceedances using the asymptotically motivated generalised Pareto distribution. This approach involves the selection of a high threshold above which the…
We develop a framework especially suited to the autocorrelation properties observed in financial times series, by borrowing from the physical picture of turbulence. The success of our approach as applied to high frequency foreign exchange…
This article proposes a new method of truncated estimation to estimate the tail index $\alpha$ of the extremely heavy-tailed distribution with infinite mean or variance. We not only present two truncated estimators $\hat{\alpha}$ and…
After a brief review of option pricing theory, we introduce various methods proposed for extracting the statistical information implicit in options prices. We discuss the advantages and drawbacks of each method, the interpretation of their…
The upper tail of a claim size distribution of a property line of business is frequently modelled by Pareto distribution. However, the upper tail does not need to be Pareto distributed, extraordinary shapes are possible. Here, the…
We introduce a statistical model for operational losses based on heavy-tailed distributions and bipartite graphs, which captures the event type and business line structure of operational risk data. The model explicitly takes into account…
We study the problem of factor modelling vector- and tensor-valued time series in the presence of heavy tails in the data, which produce extreme observations with non-negligible probability. We propose to combine a two-step procedure for…
Assessing dependence within co-movements of financial instruments has been of much interest in risk management. Typically, indices of tail dependence are used to quantify the strength of such dependence, although many of the indices…
Applying a modification of Extreme value Theory (thanks to a dual distribution technique by the authors on data over the past 2,500 years, we show that pandemics are extremely fat-tailed in terms of fatalities, with a marked potentially…
We examine random variables in the power law/regularly varying class with stochastic tail exponent, the exponent $\alpha$ having its own distribution. We show the effect of stochasticity of $\alpha$ on the expectation and higher moments of…
We propose a model for stochastic formation of opinion clusters, modelled by an evolving network, and herd behaviour to account for the observed fat-tail distribution in returns of financial-price data. The only parameter of the model is h,…
In some fields of applications of stable distributions, especially in economics, it appears, that data have distributions similar to stable in a large region, but do not have such heavy tails. Our aim in this note is to propose several…
Observations indicate that the distributions of stock returns in financial markets usually do not conform to normal distributions, but rather exhibit characteristics of high peaks, fat tails and biases. In this work, we assume that the…
Reliable calculations of financial risk require that the fat-tailed nature of prices changes is included in risk measures. To this end, a non-Gaussian approach to financial risk management is presented, modeling the power-law tails of the…
Universal features in stock markets and their derivative markets are studied by means of probability distributions in internal rates of return on buy and sell transaction pairs. Unlike the stylized facts in log normalized returns, the…
This paper proposes a new measure of tail risk spillover. The empirical application provides evidence of significant volatility and tail risk spillovers from the financial sector to many real economy sectors in the U.S. economy in the…
Different questions related with analysis of extreme values and outliers arise frequently in practice. To exclude extremal observations and outliers is not a good decision because they contain important information about the observed…
We propose a parsimonious quantile regression framework to learn the dynamic tail behaviors of financial asset returns. Our model captures well both the time-varying characteristic and the asymmetrical heavy-tail property of financial time…
Since the turn of the century, there has been increased interest in the application of heavy-tailed distributions, particularly stable distributions, to problems in physics and finance. Although, the tails of stable distributions provide a…