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Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates

Received: 1 September 2016     Accepted: 23 September 2016     Published: 14 October 2016
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Abstract

In the last decade, world financial markets, including the Kenyan market have been characterized by significant instabilities. This has resulted to criticism on available risk management systems and motivated research on better methods capable of identifying rare events that have resulted in heavy consequences. With the high volatility of the Kenyan Shilling/Us dollar exchange rates, it is important to come up with a more reliable method of evaluating the financial risk associated with such financial data. In the recent past, extensive research has been carried out to analyze extreme variations that financial markets are subject to, mostly because of currency crises, stock market crashes and large credit defaults. We considered the behavior of the tails of financial series. More specially was focus on the use of extreme value theory to assess tail-related risk; we thus aim at providing a modeling tool for modern risk management. Extreme Value Theory provides a theoretical foundation on which we can build statistical models describing extreme events. This will help in predictability of such future rare events.

Published in Science Journal of Applied Mathematics and Statistics (Volume 4, Issue 6)
DOI 10.11648/j.sjams.20160406.11
Page(s) 249-255
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2016. Published by Science Publishing Group

Keywords

Extreme Value Theory (EVT), Generalized Pareto Distribution (GPD), Peaks-Over-Threshold (POT)

References
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Cite This Article
  • APA Style

    Charles Kithenge Chege, Joseph Kyalo Mungat’u, Oscar Ngesa. (2016). Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates. Science Journal of Applied Mathematics and Statistics, 4(6), 249-255. https://doi.org/10.11648/j.sjams.20160406.11

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    ACS Style

    Charles Kithenge Chege; Joseph Kyalo Mungat’u; Oscar Ngesa. Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates. Sci. J. Appl. Math. Stat. 2016, 4(6), 249-255. doi: 10.11648/j.sjams.20160406.11

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    AMA Style

    Charles Kithenge Chege, Joseph Kyalo Mungat’u, Oscar Ngesa. Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates. Sci J Appl Math Stat. 2016;4(6):249-255. doi: 10.11648/j.sjams.20160406.11

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  • @article{10.11648/j.sjams.20160406.11,
      author = {Charles Kithenge Chege and Joseph Kyalo Mungat’u and Oscar Ngesa},
      title = {Estimating the Extreme Financial Risk of the Kenyan Shilling Versus Us Dollar Exchange Rates},
      journal = {Science Journal of Applied Mathematics and Statistics},
      volume = {4},
      number = {6},
      pages = {249-255},
      doi = {10.11648/j.sjams.20160406.11},
      url = {https://doi.org/10.11648/j.sjams.20160406.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.sjams.20160406.11},
      abstract = {In the last decade, world financial markets, including the Kenyan market have been characterized by significant instabilities. This has resulted to criticism on available risk management systems and motivated research on better methods capable of identifying rare events that have resulted in heavy consequences. With the high volatility of the Kenyan Shilling/Us dollar exchange rates, it is important to come up with a more reliable method of evaluating the financial risk associated with such financial data. In the recent past, extensive research has been carried out to analyze extreme variations that financial markets are subject to, mostly because of currency crises, stock market crashes and large credit defaults. We considered the behavior of the tails of financial series. More specially was focus on the use of extreme value theory to assess tail-related risk; we thus aim at providing a modeling tool for modern risk management. Extreme Value Theory provides a theoretical foundation on which we can build statistical models describing extreme events. This will help in predictability of such future rare events.},
     year = {2016}
    }
    

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    AB  - In the last decade, world financial markets, including the Kenyan market have been characterized by significant instabilities. This has resulted to criticism on available risk management systems and motivated research on better methods capable of identifying rare events that have resulted in heavy consequences. With the high volatility of the Kenyan Shilling/Us dollar exchange rates, it is important to come up with a more reliable method of evaluating the financial risk associated with such financial data. In the recent past, extensive research has been carried out to analyze extreme variations that financial markets are subject to, mostly because of currency crises, stock market crashes and large credit defaults. We considered the behavior of the tails of financial series. More specially was focus on the use of extreme value theory to assess tail-related risk; we thus aim at providing a modeling tool for modern risk management. Extreme Value Theory provides a theoretical foundation on which we can build statistical models describing extreme events. This will help in predictability of such future rare events.
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Author Information
  • Applied Statistics, Department of Statistics and Actuarial Science, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

  • Statistics, Department of Statistics and Actuarial Science, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

  • Applied Statistics, Department of Statistics and Actuarial Science, Jomo Kenyatta University of Agriculture and Technology, Nairobi, Kenya

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