Evaluation of Value at Risk (VaR) using extreme value theory in Asian four tigers.

• Main Authors: Leong, Thin Hom., Neo, Wee Wu.
• Other Authors: Low, Chan Kee
• Format: Final Year Project
• Published: 2008
• Subjects: DRNTU::Business::Finance::Banking; DRNTU::Business::General::Economic and business aspects
• Online Access: http://hdl.handle.net/10356/2159
• Institution: Nanyang Technological University

Value at Risk (VaR) is widely applied in finance for quantitative risk management for many types of risks in the market. It is commonly used in trading portfolio by banks and other financial institutions for the past decade. Our objective for this paper is to understand and apply Extreme Value Theory (EVT) as a VaR methodology in a financial case study. In this paper, we will be using Asian Four Tigers (AFT) as our case. Asian Four Tigers (AFT) - Hong Kong, South Korea, Singapore, and Taiwan are the miracles in the Asian economy ever since 1970s. Their high economic growth and high export volume have instilled research interest on these economies in particularly, their financial markets. In this paper, we will select the key stock indices of each of the AFT namely: Hong Kong’s Hang Sang Index (HK-HSI), South Korea’s Korea Composite Stock Price Index (SK – KOSPI), Singapore’s Straits Times Index (SG-STI) and Taiwan’s Taiwan Capitalization Weighted Stock Index (TW – TCWSI) as our case. Calculations of their respective VaRs will be done by using Extreme Value Theory (EVT).