Risk Analysis of Gold Prices in Pakistan Using Extreme Value Theory | Zendy

Ghulam Raza Khan | Zendy; Alanazi Talal Abdulrahman | Zendy; Osama Abdulaziz Alamri | Zendy; Zahid Iqbal | Zendy; Maqsood Ahmad | Zendy

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Risk Analysis of Gold Prices in Pakistan Using Extreme Value Theory

Author(s) -

Ghulam Raza Khan,

Alanazi Talal Abdulrahman,

Osama Abdulaziz Alamri,

Zahid Iqbal,

Maqsood Ahmad

Publication year - 2021

Publication title -

mathematical problems in engineering

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.262

H-Index - 62

eISSN - 1026-7077

pISSN - 1024-123X

DOI - 10.1155/2021/2704142

Subject(s) - extreme value theory , generalized pareto distribution , bullion , generalized extreme value distribution , econometrics , value at risk , economics , risk management , actuarial science , financial risk , gumbel distribution , expected shortfall , financial economics , mathematics , statistics , geography , finance , archaeology

Extreme value theory (EVT) is useful for modeling the impact of crashes or situations of extreme stress on investor portfolios. EVT is mostly utilized in financial modeling, risk management, insurance, and hydrology. The price of gold fluctuates considerably over time, and this introduces a risk on its own. The goal of this study is to analyze the risk of gold investment by applying the EVT to historical daily data for extreme daily losses and gains in the price of gold. We used daily gold prices in the Pakistan Bullion Market from August 1, 2011 to July 30, 2021. This paper covers two methods such as Block Maxima (BM) and Peak Over Threshold (POT) modeling. The risk measures which are adopted in this paper are Value at Risk (VaR) and Expected Shortfall (ES). The point and interval estimates of VaR and ES are obtained by fitting the Generalized Pareto (GPA) distribution. Moreover, in this paper, return-level forecasting is also included for the next 5 and 10 years by analyzing the Generalized Extreme Value (GEV) distribution.

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