Fat Tails, Scaling, and Stable Laws: A Critical Look at Modeling Extremal Events in Financial Phenomena
SERGIO M. FOCARDI
(Partner at The Intertek Group in Paris. inlerteksf@aol.com)
FRANK J. FABOZZI
(Frederick Frank Adjunct Professor of Finance at the School of Management at Yale University. fabozzi321@aol.com)
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Abstract
Fat‐tailed distributions have been found in many financial and economic variables ranging from forecasting returns on financial assets to modeling recovery distributions in bankruptcies. They have also been found in numerous insurance applications such as catastrophic insurance claims and in value‐at‐risk measures employed by risk managers. Financial applications include:
Citation
FOCARDI, S.M. and FABOZZI, F.J. (2003), "Fat Tails, Scaling, and Stable Laws:
Publisher
:MCB UP Ltd
Copyright © 2003, MCB UP Limited