Faculty of Applied Economics
Revue bancaire et financière. - Bruxelles, 2003, currens
, p. 216-220
Actively managed portfolios that include some form of protection feature in their investment objective are typically exposed to the risk of a market failure, i.e. sudden, extreme market declines. Low volatile markets like the ones we have experienced for some time last year might set minds at ease. Or a portfolio might be proven to survive the worst events of the past. Genius tends to fail, however, and sometimes one wants to try to assess the probability that the worst is yet to come. This article provides a roadmap for applying extreme value theory in such a setting, with a focus on the description of balanced fund return distributions.