Abstract
This study examines extreme tail behavior in Asian currency markets for the period of 2005-2018. Value-at-Risk (VaR) is estimated through Extreme Value Theory (EVT) approach to forecast losses incurred in a day in Asian currencies. Initially EVT approach is used to estimate extreme losses on the left tail of the distribution. Then, the VaR estimation of this approach is back tested through traditional and advance back testing methods to ascertain the accuracy of the models used. Results indicate that the estimation of GPD static model is relevant for extreme risk forecasting in EVT approach at both 95% and 99% confidence intervals. The used method is recommended for use by market players.
Keywords
Value-at-Risk (VaR), Extreme value theory (EVT), GeneralizedPareto distribution (GPD), Back testing, Risk forecasting
DOI
https://doi.org/10.54784/1990-6587.1063
Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.
Recommended Citation
Zia, S., Hassan, A., & Zia, A. (2021). Extreme tails behavior in Asian currency markets. Business Review, 15(2), 101-115. Retrieved from https://doi.org/10.54784/1990-6587.1063
