Open Science Research Excellence
%0 Journal Article
%A Dany Ng Cheong Vee and  Preethee Nunkoo Gonpot and  Noor-Ul-Hacq Sookia
%D 2014 
%J  International Journal of Mathematical, Computational, Physical, Electrical and Computer Engineering
%B World Academy of Science, Engineering and Technology
%I International Science Index 90, 2014
%T An Application of Extreme Value Theory as a Risk Measurement Approach in Frontier Markets
%U http://waset.org/publications/9998475
%V 90
%X In this paper, we consider the application of Extreme
Value Theory as a risk measurement tool. The Value at Risk, for a set
of indices, from six Stock Exchanges of Frontier markets is
calculated using the Peaks over Threshold method and the
performance of the model index-wise is evaluated using coverage
tests and loss functions. Our results show that “fattailedness” alone of
the data is not enough to justify the use of EVT as a VaR approach.
The structure of the returns dynamics is also a determining factor.
This approach works fine in markets which have had extremes
occurring in the past thus making the model capable of coping with
extremes coming up (Colombo, Tunisia and Zagreb Stock
Exchanges). On the other hand, we find that indices with lower past
than present volatility fail to adequately deal with future extremes
(Mauritius and Kazakhstan). We also conclude that using EVT alone
produces quite static VaR figures not reflecting the actual dynamics
of the data.

%P 919 - 929