Facoltà di scienze economiche

Essay on asymmetry and tails : different approaches

Cazzaniga, Sofia ; Franzoni, Francesco (Dir.)

Thèse de doctorat : Università della Svizzera italiana, 2013 ; 2013ECO012.

This thesis investigates the role of extreme events and of tails in financial asset returns distribution. It is composed of three parts. Chapter 1 details the application of a fast convolution algorithm to compute high dimensional integrals in the context of multiplicative noise stochastic processes describing financial return. Chapter 2 deals with downside risk in the currency markets by means... More

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    Summary
    This thesis investigates the role of extreme events and of tails in financial asset returns distribution. It is composed of three parts. Chapter 1 details the application of a fast convolution algorithm to compute high dimensional integrals in the context of multiplicative noise stochastic processes describing financial return. Chapter 2 deals with downside risk in the currency markets by means of a proxy for the skewness of a high-minus-low currency portfolio, measuring the aggregate asymmetry of daily changes in spot exchange rates involved in a carry-trade strategy, and by means of a factor tracking downside risk of deep-into-the-tails observations constructed exploiting EVT techniques. Chapter 3 introduces a measure of country specific co-dependence between carry trade excess returns and the equity market of the target country in bad states of the local economy. This measure is called downside co-dependence" and it is used to asses that, besides standard risk factors, there are country specific characteristics that affect the performance of currency strategies.