Extreme Value Theory: Potential And Limitations As An Integrated Risk Management Tool (2000)
| Venue: | Derivatives Use, Trading & Regulation |
| Citations: | 18 - 0 self |
BibTeX
@ARTICLE{Embrechts00extremevalue,
author = {Paul Embrechts},
title = {Extreme Value Theory: Potential And Limitations As An Integrated Risk Management Tool},
journal = {Derivatives Use, Trading & Regulation},
year = {2000},
volume = {6}
}
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Abstract
. Extreme Value Theory (EVT) is currently very much in the focus of interest in quantitative risk management. Originally conceived as the mathematical (probabilistic/statistical) theory for analysing rare events, it recently entered the risk management stage. In this paper I discuss some of the issues (mainly, but not exclusively) related to Value{at{Risk methodology. I try to come up with a virtues versus limitations assessment, both from an academic as well as from an end{user point of view. 1. Introduction Without any doubt, Value{at{Risk (VaR) thinking has revolutionised Integrated Risk Management (IRM), both at the quantitative (obvious) and at the qualitative (not so obvious) level. Originally conceived as a one{number summary of (short term) Market Risk, it is now being used in many dierent risk management systems like Credit Risk (Credit{VaR) and Operational Risk. Even the insurance world which could claim, through its actuarial skills, to be the master of risk, has im...
