Estimation Of Value At Risk With Extreme Value Theory And An Application On Istanbul Stock Exchange

Risk management has become more important factor in financial markets within 30 years. Therefore, more complicated risk management tools are needed. There are two main methods of measuring the risk. Both methods have statistical basic facilities. First method is measuring value at risk. The second one is loss function method. Loss function method needs an assumption of any distribution. Because of not using distribution assumption Value at risk method is used. Value at risk is defined as a threshold value such that the probability that the mark-to-market loss on the portfolio over the given time horizon exceeds this value (assuming normal markets and no trading) is the given probability level. In this study the extreme value theorem is used to measure value at risk and at high volatilities, it is discovered that this method gives better solution than other methods. In application Istanbul stock exchange-100 data is used.