Economics, Econometrics and Finance
8 years ago

New method for measuring financial risks outperforms traditional approaches.

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Korean Journal of Applied Statistics
Estimation and Performance Analysis of Risk Measures using Copula and Extreme Value Theory
Sung Chil Yeo

Paper Summary

The article discusses a new method for measuring financial risks in portfolios. Instead of assuming a normal distribution, researchers used extreme value theory and copulas to estimate VaR and ES, two important risk measures. By combining these methods, they found that the EVT-copula approach is more accurate than the traditional variance-covariance method for measuring portfolio risk.

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