Type

Working Paper

Authors

John Cotter

Subjects

Economics

Topics
extreme value theory financial markets stock exchanges global markets financial crises financial modelling g10

Modelling financial crises of global equity markets (2004)

Abstract Extreme asset price movements have major consequences for an economy’s financial stability and monetary policies. The recent equity price movements associated with financial crises appear to be more pronounced and policy makers need to make accurate predictions of the frequency and severity of these events. This paper investigates the extreme behaviour of equity market returns and quantifies the possible losses associated with financial crises. Extreme value theory that models tail realisations only is applied to equity indices representing American, Asian and European markets. The paper finds that the tail realisations are adequately modelled with the fat-tailed Fréchet distribution. Furthermore tail realisations associated with the downside of a distribution are greater than the upside.
Collections Ireland -> University College Dublin -> School of Business
Ireland -> University College Dublin -> Centre for Financial Markets Working Papers
Ireland -> University College Dublin -> College of Business

Full list of authors on original publication

John Cotter

Experts in our system

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John Cotter
University College Dublin
Total Publications: 93