The behavior of extreme values in Germany's stock index futures: An application to intradaily margin setting

The behavior of extreme values in Germany's stock index futures: An application to intradaily margin setting

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Article ID: iaor19992384
Country: Netherlands
Volume: 104
Issue: 3
Start Page Number: 393
End Page Number: 402
Publication Date: Feb 1998
Journal: European Journal of Operational Research
Authors: ,
Abstract:

Recent defaults and large financial losses attributed to derivative security investing point to an area of finance not often researched, i.e. the probabilities of observing extreme occurrences. This paper examines this behavior for German stock index futures (FDAX) contracts. Its empirical results indicate that large FDAX intradaily price changes follow a Fréchet extreme value distribution and the extreme value distribution probabilities may be confidently used to help set intradaily margin levels.

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