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Questions tagged [pareto-distribution]

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Extreme Value Theory: GPD application to returns, not losses (PnL)?

As it is often presented, Extreme Value Theory (EVT) is applied to financial losses (and gains as well, but always focusing in the tails). By EVT, I especially refer to: 1) Mean excess plot to find ...
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Fitting Tail Data to Generalized Pareto Distribution in R

I have a dataset of S&P500 returns for 16 yrs. When I plot the ECDF of the S&P500 and compare it against the CDF of an equivalent Normal distribution, I can see the existence of Fat Tails in ...