New study reveals market risk models may severely underestimate potential losses
The article examines extreme market risks across different types of assets and financial markets worldwide. The researchers found that the distribution of extreme gains and losses may be better represented by the generalized logistic distribution rather than other commonly used distributions. They also discovered that the parameters of these distributions vary over time, which has important implications for risk modeling. Inaccurate estimation of extreme market risks can lead to severe underestimation of potential losses for investors.