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Measuring Risk of Financial Markets: Based on Extreme Spectral Risk Measures |
YI Zhi YANG Min-min |
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Abstract How to accurately measure risks of financial markets will be an eternal topic. The scientific methods of risk measurement should not only consider the real-time volatility of the financial markets but also the investor's risk attitude. We apply the Peaks Over Threshold model to measuring the risks of Shanghai Composite Index, Hong Kong Hang Seng Index and U. S. Dow Jones Index by extreme spectral risk measures, and compare them with Value at Risk and Expected Shortfall measures of risk. The empirical results show that comparing with the value of Value at Risk and Expected Shortfall which ignore the investor's risk attitude, extreme spectral risk measures, which consider investor's risk aversion attitude, are more precise to measure the actual risk of financial markets.
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Received: 10 March 2009
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Corresponding Authors:
YANG Min-min
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