Journal of World Economic Research

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Estimation of Value-at-Risk Measures in the Islamic Stock Market: Approach Based on Extreme Value Theory (EVT)

Received: 20 May 2014    Accepted: 05 June 2014    Published: 10 July 2014
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Abstract

In this paper, we have combined the Extreme Value Approach with GARCH model which is called conditional EVT. We have used their approach on the Islamic stock price index to measure the conditional VaR and the related risk statistic expected shortfall (ES). The dynamic risk measures have been estimated for different percentiles for negative and positive returns. The empirical results show a strong stability across of the selected threshold, implying the accuracy and reliability of the estimated quantile based risk measures. Interested islamic index fund managers could employ these techniques as a means of risk management.

DOI 10.11648/j.jwer.20140302.11
Published in Journal of World Economic Research (Volume 3, Issue 2, April 2014)
Page(s) 15-20
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Extreme Value Theory (EVT), Value-at-Risk (VaR), Peak over Threshold Method (POT), Expected Shortfall (ES)

References
[1] Anderson, T.G., Bollerslev, T., Lange, S., (1999) "Forecasting financial market volatility: sample frequency Vis-à-vis forecast horizon", Jornal of Empirical Finance 6,457-477.
[2] Andrews , N.,& THomas, M.(2002) "At the end the tail" EPRM 75-77.
[3] Bali T.G., (2003), "An extreme value approch to estimating volatility and value at risk" the journal of Business, (76),1ABI/INFORM, pp 83-108.
[4] Bali, Turan G. (2007). "A generalized extreme value approach to financial risk measurement". Journal of Money, Credit, and Banking(39), 1611–1647.
[5] Bekiros S.D., et Georgoutsos, D.A, (2005) "Estimation of Value-at-Risk by extreme value and conditional methods: a comparative evaluation of their predictive performance" Journal of International Financial Markets, Institutions & Money 15, 209-228.
[6] Bystrom, Hans N. S. (2004). "Managing extreme risks in tranquil and volatile markets using conditional extreme value theory". International Review of Financial Analysis, 13(2), 133–152.
[7] Christoph Hartz, Stefan Mittnik, and Marc Paolella, (2006)"Accurate value-at-risk forcasting based on the normal-GARCH model", Computation Statistics & Data Analysis 51 (2006) 2295-2312.
[8] Cotter, J. (2007). "Varying the VaR for unconditional and conditional environments". Journal of International Money and Finance, 26(8), 1338–1354.
[9] Danielsson, J., & de Vries, C. (1997a)." Beyond the sample: Extreme quantile and probability estimation". Rotterdam Tinbergen Institute
Author Information
  • FSEG of Sousse, Erriath City, Sousse, Tunisia

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  • APA Style

    Haïfa Frad, Ezzeddine Zouari. (2014). Estimation of Value-at-Risk Measures in the Islamic Stock Market: Approach Based on Extreme Value Theory (EVT). Journal of World Economic Research, 3(2), 15-20. https://doi.org/10.11648/j.jwer.20140302.11

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    ACS Style

    Haïfa Frad; Ezzeddine Zouari. Estimation of Value-at-Risk Measures in the Islamic Stock Market: Approach Based on Extreme Value Theory (EVT). J. World Econ. Res. 2014, 3(2), 15-20. doi: 10.11648/j.jwer.20140302.11

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    AMA Style

    Haïfa Frad, Ezzeddine Zouari. Estimation of Value-at-Risk Measures in the Islamic Stock Market: Approach Based on Extreme Value Theory (EVT). J World Econ Res. 2014;3(2):15-20. doi: 10.11648/j.jwer.20140302.11

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  • @article{10.11648/j.jwer.20140302.11,
      author = {Haïfa Frad and Ezzeddine Zouari},
      title = {Estimation of Value-at-Risk Measures in the Islamic Stock Market: Approach Based on Extreme Value Theory (EVT)},
      journal = {Journal of World Economic Research},
      volume = {3},
      number = {2},
      pages = {15-20},
      doi = {10.11648/j.jwer.20140302.11},
      url = {https://doi.org/10.11648/j.jwer.20140302.11},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.jwer.20140302.11},
      abstract = {In this paper, we have combined the Extreme Value Approach with GARCH model which is called conditional EVT. We have used their approach on the Islamic stock price index to measure the conditional VaR and the related risk statistic expected shortfall (ES). The dynamic risk measures have been estimated for different percentiles for negative and positive returns. The empirical results show a strong stability across of the selected threshold, implying the accuracy and reliability of the estimated quantile based risk measures. Interested islamic index fund managers could employ these techniques as a means of risk management.},
     year = {2014}
    }
    

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    AB  - In this paper, we have combined the Extreme Value Approach with GARCH model which is called conditional EVT. We have used their approach on the Islamic stock price index to measure the conditional VaR and the related risk statistic expected shortfall (ES). The dynamic risk measures have been estimated for different percentiles for negative and positive returns. The empirical results show a strong stability across of the selected threshold, implying the accuracy and reliability of the estimated quantile based risk measures. Interested islamic index fund managers could employ these techniques as a means of risk management.
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