Modeling and Risk Analysis Using Parametric Distributions with an Application in Equity-Linked Securities
Joint Authors
Source
Mathematical Problems in Engineering
Issue
Vol. 2020, Issue 2020 (31 Dec. 2020), pp.1-20, 20 p.
Publisher
Hindawi Publishing Corporation
Publication Date
2020-03-26
Country of Publication
Egypt
No. of Pages
20
Main Subjects
Abstract EN
In this study, we model the returns of a stock index using various parametric distribution models.
There are four indices used in this study: HSCEI, KOSPI 200, S&P 500, and EURO STOXX 50.
We applied 12 distributions to the data of these stock indices—Cauchy, Laplace, normal, Student’s t, skew normal, skew Cauchy, skew Laplace, skew Student’s t, hyperbolic, normal inverse Gaussian, variance gamma, and general hyperbolic—for the parametric distribution model.
In order to choose the best-fit distribution for describing the stock index, we used the information criteria, goodness-of-fit test, and graphical tail test for each stock index.
We estimated the value-at-risk (VaR), one of the most popular management concepts in the area of risk management, for the return of stock indices.
Furthermore, we applied the parametric distributions to the risk analysis of equity-linked securities (ELS) as they are a very popular financial product on the Korean financial market.
Relevant risk measures, such as VaR and conditional tail expectation, are calculated using various distributions.
For calculating the risk measures, we used Monte Carlo simulations under the best-fit distribution.
According to the empirical results, investing in ELS is more risky than investing in securities, and the risk measure of the ELS heavily depends on the type of security.
American Psychological Association (APA)
Choi, Sun-Yong& Yoon, Ji-Hun. 2020. Modeling and Risk Analysis Using Parametric Distributions with an Application in Equity-Linked Securities. Mathematical Problems in Engineering،Vol. 2020, no. 2020, pp.1-20.
https://search.emarefa.net/detail/BIM-1202461
Modern Language Association (MLA)
Choi, Sun-Yong& Yoon, Ji-Hun. Modeling and Risk Analysis Using Parametric Distributions with an Application in Equity-Linked Securities. Mathematical Problems in Engineering No. 2020 (2020), pp.1-20.
https://search.emarefa.net/detail/BIM-1202461
American Medical Association (AMA)
Choi, Sun-Yong& Yoon, Ji-Hun. Modeling and Risk Analysis Using Parametric Distributions with an Application in Equity-Linked Securities. Mathematical Problems in Engineering. 2020. Vol. 2020, no. 2020, pp.1-20.
https://search.emarefa.net/detail/BIM-1202461
Data Type
Journal Articles
Language
English
Notes
Includes bibliographical references
Record ID
BIM-1202461