Generalized Pareto processes and fund liquidity risk

DOI10.1080/14697688.2017.1410214zbMATH Open1400.91658arXiv1702.06993OpenAlexW2793357235MaRDI QIDQ4554499FDOQ4554499

Authors: Sascha Desmettre, Johan de Kock, P. Ruckdeschel, Frank Thomas Seifried 

Publication date: 14 November 2018

Published in: Quantitative Finance (Search for Journal in Brave)

Abstract: Motivated by the modeling of liquidity risk in fund management in a dynamic setting, we propose and investigate a class of time series models with generalized Pareto marginals: the autoregressive generalized Pareto process (ARGP), a modified ARGP (MARGP) and a thresholded ARGP (TARGP). These models are able to capture key data features apparent in fund liquidity data and reflect the underlying phenomena via easily interpreted, low-dimensional model parameters. We establish stationarity and ergodicity, provide a link to the class of shot-noise processes, and determine the associated interarrival distributions for exceedances. Moreover, we provide estimators for all relevant model parameters and establish consistency and asymptotic normality for all estimators (except the threshold parameter, which as usual must be dealt with separately). Finally, we illustrate our approach using real-world fund redemption data, and we discuss the goodness-of-fit of the estimated models.

Full work available at URL: https://arxiv.org/abs/1702.06993

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zbMATH Keywords

liquidity riskARGP processdata features

Mathematics Subject Classification ID

Statistical methods; risk measures (91G70)

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Cited In (2)

• Predicting large amounts of accrued payables to redeem open-end funds
• Bivariate integer-autoregressive process with an application to mutual fund flows

Uses Software

• R
• ismev

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