/

Applying EVT and alternatives to portfolio construction and the management of risk


This presentation describes why return series are often 'fat tailed', strengths and weaknesses of (traditional) Extreme Value Theory (EVT) approaches and interaction with portfolio construction.

[as pdf]

Slides
1Applying EVT and alternatives to portfolio construction and the management of risk
2Using EVT and alternatives
3Modelling fat-tailed behaviour for individual risks
4Many (most?) investment return series are ‘fat-tailed’
5Why are return series often fat-tailed?
6Distributional mixtures of Normal distributions
7Explains some equity index fat fails, particularly upside
8And over longer time periods
9Crowded trades and leverage
10Extreme Value Theory (EVT)
11Restatement of EVT results
12Main result for block maxima
13Main result for excesses
14Potential weaknesses
15Using EVT and alternatives to Estimate VaRs
16Some subtleties of EVT
17Portfolio construction
18Portfolio construction - sensitivities
19Incorporating fat tails - Solution A - simplest
20Incorporating fat tails - Solution B - more sophisticated
21Summary
22Important Information



NAVIGATION LINKS
Contents | Next | Library


Desktop view | Switch to Mobile