Volume 4, Issue 6, December 2016, Page: 249-255
Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates
Charles Kithenge Chege, Applied Statistics, Department of Statistics and Actuarial Science, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
Joseph Kyalo Mungat’u, Statistics, Department of Statistics and Actuarial Science, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
Oscar Ngesa, Applied Statistics, Department of Statistics and Actuarial Science, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya
Received: Sep. 1, 2016;       Accepted: Sep. 23, 2016;       Published: Oct. 14, 2016
DOI: 10.11648/j.sjams.20160406.11      View  3327      Downloads  126
Abstract
In the last decade, world financial markets, including the Kenyan market have been characterized by significant instabilities. This has resulted to criticism on available risk management systems and motivated research on better methods capable of identifying rare events that have resulted in heavy consequences. With the high volatility of the Kenyan Shilling/Us dollar exchange rates, it is important to come up with a more reliable method of evaluating the financial risk associated with such financial data. In the recent past, extensive research has been carried out to analyze extreme variations that financial markets are subject to, mostly because of currency crises, stock market crashes and large credit defaults. We considered the behavior of the tails of financial series. More specially was focus on the use of extreme value theory to assess tail-related risk; we thus aim at providing a modeling tool for modern risk management. Extreme Value Theory provides a theoretical foundation on which we can build statistical models describing extreme events. This will help in predictability of such future rare events.
Keywords
Extreme Value Theory (EVT), Generalized Pareto Distribution (GPD), Peaks-Over-Threshold (POT)
To cite this article
Charles Kithenge Chege, Joseph Kyalo Mungat’u, Oscar Ngesa, Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates, Science Journal of Applied Mathematics and Statistics. Vol. 4, No. 6, 2016, pp. 249-255. doi: 10.11648/j.sjams.20160406.11
Copyright
Copyright © 2016 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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