Applications of Extreme Value Theory for Market Risks Estimation : A Review

In this paper, we analytically review the applications of Extreme Value Theory for Market Risks Estimation. The mathematical definitions of modelling tails are explained and illustrated using suitable example. The application of EVT is significant to risk measures and educates the managers to understand the consequential trends in broader sense. The end of decade (1998-2008) has been characterized by significant instabilities in financial markets worldwide. It has led to numerous criticisms about the existing risk management systems and motivated the search for more appropriate methodologies capable of coping with rare events that have bad consequences