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EVT and alternatives [21]

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Bullet points include: Fat-tailed behaviour. Very common in practice. Several intrinsic reasons for its existence, including time-varying world. Extreme Value Theory (EVT). Enticingly simple (at least in concept). But subject to same underlying issues as any other form of extrapolation. Portfolio construction can be refined to cater better for extreme events. Adjust for (global) time-varying volatility. Any further refinements become very complex

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