Risk Analysis of Chinese Stock Market Based on Wavelet-Based Extreme Value Theory
Dong Xiaoy · Journal of the University of Shanghai for Science and Technology · 2015
The model of conditional value-at-risk(CVaR)was utilized to control market risks.Wavelets technique and extreme value theory(EVT)were combined to estimate the conditional valueat-risk.Wavelets were used as a threshold in generalized Pareto distribution,and EVT was applied with a wavelet-based threshold,then the CVaR was estimated by virtue of the extreme theory.This new model has been applied to two major stock markets:the Hang Seng index and the Shenzhen composite index.The relative performance of the wavelet-based EVT was benchmarked against the conditional extreme value theory.The empirical results show that the wavelet-based EVT improves the predictive performance of financial forecasting according to the number of violations and for the results of tailloss tests.