FrechetESPlot2DCl function

Plots Frechet Expected Shortfall against confidence level

Plots the ES of a portfolio against confidence level assuming extreme losses are Frechet distributed, for specified confidence level and a given holding period.

FrechetESPlot2DCl(mu, sigma, tail.index, n, cl, hp)

Arguments

• mu: Location parameter for daily L/P
• sigma: Scale parameter for daily L/P
• tail.index: Tail index
• n: Block size from which maxima are drawn
• cl: Confidence level and should be a vector
• hp: Holding period

Details

Note that the long-right-hand tail is fitted to losses, not profits.

Examples

# Plots ES against vector of cl assuming Frechet Distribution for given parameters
   cl <- seq(0.9,0.99,0.01)
   FrechetESPlot2DCl(3.5, 2.3, 1.6, 10, cl, 30)

Author(s)

Dinesh Acharya

References

Dowd, K. Measuring Market Risk, Wiley, 2007.

Embrechts, P., Kluppelberg, C. and Mikosch, T., Modelling Extremal Events for Insurance and Finance. Springer, Berlin, 1997, p. 324.

Reiss, R. D. and Thomas, M. Statistical Analysis of Extreme Values from Insurance, Finance, Hydrology and Other Fields, Birkhaueser, Basel, 1997, 15-18.