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An Alternative Study of the Determination of the Threshold for the Generalized Pareto Distribution
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 Title & Authors
An Alternative Study of the Determination of the Threshold for the Generalized Pareto Distribution
Yoon, Jeong-Yoen; Cho, Jae-Beom; Jun, Byoung-Cheol;
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In practice, thresholds are determined by the two subjective assessment methods in a generalized pareto distribution of mean extreme function(MEF-graph) or Hill-graph. To remedy the problem of subjectiveness of these methods, we propose an alternative method to determine the threshold based on the robust statistics. We compared the MEF-graph, Hill-graph and our method through VaRs on the Korean stock market data from January 5, 1987 to August 3, 2009. As a result, the VaR based on the proposed method is not much different from the existing methods, and the standard deviation of VaR for our method was the smallest. The results show that our method can be a promising alternative to determine thresholds of the generalized pareto distributions.
Generalized pareto distribution;threshold;MEF-graph;Hill-graph;robust estimation;VaR;
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