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Measuring and managing market, credit and Op risk [99]

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Bullet points include: If GARCH innovations are Gaussian then process is unconditionally fat-tailed (Excess) kurtosis of time series of returns generated from a GARCH model > 0 Conditionally, if shocks are Gaussian then (excess) kurtosis should be about zero and large outliers unlikely To have conditional fat tails (or skew) requires fat-tailed (skew) innovations N.B. possible confusion over definition of kurtosis: does it include/exclude -3?

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