How does innovation tail risk determine marginal tail risk of a stationary financial time series?

Jiazhu Pan, Bosco W. T. Yu, W. K. Pang

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

We discuss the relationship between the marginal tail risk probability and the innovation’s tail risk probability for some stationary financial time series models. We first give the main results on the tail behavior of a class of infinite weighted sums of random variables with heavy-tailed probabilities. And then, the main results are applied to three important types of time series models: infinite order moving averages, the simple bilinear time series and the solutions of stochastic difference equations. The explicit formulas are given to describe how the marginal tail probabilities come from the innovation’s tail probabilities for these time series. Our results can be applied to the tail estimation of time series and are useful for risk analysis in finance.
LanguageEnglish
Pages321-338
Number of pages18
JournalScience China Mathematics
Volume47
Issue number3
DOIs
Publication statusPublished - May 2004

Fingerprint

Stationary Time Series
Financial Time Series
Tail
Tail Probability
Time series
Time Series Models
Stochastic Difference Equation
Sums of Random Variables
Infinite sum
Tail Behavior
Risk Analysis
Moving Average
Weighted Sums
Finance
Explicit Formula
Innovation
Tail risk
Financial time series
Tail probability
Time series models

Keywords

  • risk analysis
  • infinite weighted sum
  • moving average
  • bilinear model
  • stochastic difference equation
  • tail probability
  • vague convergence

Cite this

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How does innovation tail risk determine marginal tail risk of a stationary financial time series? / Pan, Jiazhu; Yu, Bosco W. T.; Pang, W. K.

In: Science China Mathematics, Vol. 47, No. 3, 05.2004, p. 321-338.

Research output: Contribution to journalArticle

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