Extreme value theory and peaks over threshold model in the Russian stock market

Traditional research methods adopts normal distributions as a pattern of the stock market behavior. This paper utilized POT model of extreme value theory, and GPD distribution which can give more accurate description on tail distribution of financial returns/losses. EVT and POT techniques are applied to a series of daily losses of the RTS index (RTSI) over a 15-year period (1995-2009), RTSI is total index of 50 largest Russian stocks. The focus is on the use of proposed methods to asses tail related risk providing a modeling tool for modern risk management.