Extreme events in finance
Introduction to the handbook
François Longin – ESSEC Business School

Extreme events in finance

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Behavior toward extremes

When I started to study extreme events in finance just after the stock market crash of October 1987, academic studies considered such events as outliers. It meant that the data associated with extreme events in financial markets were considered as abnormal and were discarded in empirical works. A few decades later, I am more than happy to edit a collective book about extreme events in finance.

Impact of EVT

Over the past decades, extreme value theory (EVT) has shown that we are gaining a better understanding of the statistical behavior of extreme movements of financial asset prices. Moreover, the understanding of the behavior of the market during extreme events is also useful for understanding the whole behavior of the market, both under ordinary and extraordinary conditions. In other words, it is a mistake to separate extreme events from other events. In fact, this could be a universal truth touching many aspects of society including business, politics, and religion.

A collective work

This book is a collective work: it gathers 25 contributions written by more than 40 contributors from all over the world. This book is diverse in terms of contributors: it includes academics and practitioners from banks, fund management firms, insurance companies and central banks. This book is also open-minded in terms of areas: while most of the chapters deal with extreme value theory and its applications in finance and insurance, it also includes professional expressions, reflection on modeling issues and time.

About this book

This book is about extreme events in finance with an emphasis on extreme value theory. It gives all the necessary information (theoretical results and estimation methods) to apply the techniques to financial problems. It also provides useful information about financial problems where extremes matter from different points of view: academics who applied extreme value theory in finance (mainly risk management and portfolio management), and also practitioners who experienced extreme events in their working life. The objective of this book is to offer a comprehensive overview in terms of both methods and problems.

Related contributions

Extreme events in finance Extreme events in finance

François Longin, ESSEC Business School

François Longin

ESSEC Business School