Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152633
Authors: 
Upper, Christian
Werner, Thomas
Year of Publication: 
2002
Series/Report no.: 
ECB Working Paper 199
Abstract: 
The present paper focuses on three questions: (i) Are heavy tails a relevant feature of the distribution of BUND futures returns? (ii) Is the tail behaviour constant over time? (iii) If it is not, can we use the tail index as an indicator for financial market risk and does it add value in addition to classical indicators? The answers to these questions are (i) yes, (ii) no, and (iii) yes. The tail index is on average around 3, implying the nonexistence of the fourth moments. A recently developed test for changes in the tail behaviour indicated several breaks in the degree of heaviness of the return tails. Interestingly, the tails of the return distribution do not move in parallel to realised volatility. This suggests that the tails of futures returns contain information for risk management that complements that gained from more standard statistical measures.
Subjects: 
extreme value theory
futures returns
risk management
Tail index
JEL: 
C14
G13
Document Type: 
Working Paper

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