, Volume 4, Issue 2, pp 105–127 | Cite as

Extremal Forex Returns in Extremely Large Data Sets

  • Michel M. Dacorogna
  • Ulrich A. Müller
  • Olivier V. Pictet
  • Casper G. de Vries


Exciting information for risk and investment analysis is obtained from an exceptionally large and automatically filtered high frequency data set containing all the forex quote prices on Reuters during a ten-year period. It is shown how the high frequency data improve the efficiency of the tail risk cum loss estimates. We demonstrate theoretically and empirically that the heavy tail feature of foreign exchange rate returns implies that position limits for traders calculated under the industry standard normal model are either not prudent enough, or are overly conservative depending on the time horizon.

extreme value theory regular variation large data sets position limit foreign exchange rates 


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Copyright information

© Kluwer Academic Publishers 2001

Authors and Affiliations

  • Michel M. Dacorogna
    • 1
  • Ulrich A. Müller
    • 2
  • Olivier V. Pictet
    • 3
  • Casper G. de Vries
    • 4
  1. 1.Zurich Insurance Company, ReinsuranceSwitzerland
  2. 2.Research Institute for Applied EconomicsOlsen and AssociatesSwitzerland
  3. 3.Dynamic Asset Management SASwitzerland
  4. 4.Tinbergen InstituteErasmus Universiteit RotterdamThe Netherlands

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