Extreme Value Theory for GARCH Processes

  • Richard A. DavisEmail author
  • Thomas Mikosch


We consider the extreme value theory for a stationary GARCH process with iid innovations. One of the basic ingredients of this theory is the fact that, under general conditions, GARCH processes have power law marginal tails and, more generally, regularly varying finite-dimensional distributions. Distributions with power law tails combined with weak dependence conditions imply that the scaled maxima of a GARCH process converge in distribution to a Fréchet distribution. The dependence structure of a GARCH process is responsible for the clustering of exceedances of a GARCH process above high and low level exceedances. The size of these clusters can be described by the extremal index. We also consider the convergence of the point processes of exceedances of a GARCH process toward a point process whose Laplace functional can be expressed explicitly in terms of the intensity measure of a Poisson process and a cluster distribution.


Point Process Limit Theory Stochastic Volatility Model Extremal Index Tail Index 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


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© Springer-Verlag Berlin Heidelberg 2009

Authors and Affiliations

  1. 1.Department of StatisticsColumbia UniversityNew York ,NYU.S.A.
  2. 2.Laboratory of Actuarial MathematicsUniversity of CopenhagenUniversitetsparkenDenmark

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