Looking at the extremes in volatile return series

Quantitative Risk Management in R

Alexander McNeil

Professor, University of York

Extracting the extreme of return series

  • Extract the most extreme negative log-returns exceeding 0.025
ftse <- diff(log(FTSE))["1991-01-02/2010-12-31"]
ftse_losses <- -ftse
ftse_extremes <- ftse_losses[ftse_losses > 0.025]

head(ftse_extremes)

                ^FTSE
1991-08-19 0.03119501
1992-10-05 0.04139899
1997-08-15 0.02546526
1997-10-23 0.03102717

length(ftse_extremes)

115
Quantitative Risk Management in R

Plotting the extremes values

plot(ftse_extremes, type = "h", auto.grid = FALSE)

Quantitative Risk Management in R

Let's practice!

Quantitative Risk Management in R

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