Starting Points for Extreme Value Theory and Market Crash Research

Summary

The document responds to a request for literature on extreme stock price moves and mathematical accounts of crashes. It points readers toward extreme value theory (EVT), a field concerned with the behavior and modeling of unusually large or small observations, and notes that finance and economics have a substantial body of EVT applications. Suggested starting points include a general text on modeling extreme events, a review that can orient readers to the topic, and a more theoretical reference on heavy-tailed phenomena. A separate answer recommends the work of Didier Sornette as a route into research on financial crashes.

These are bibliographic suggestions rather than a comparison of methods or a summary of empirical findings. The thread does not explain how to fit an EVT model, define a crash mathematically, or assess competing crash theories. Readers will need to consult the cited works to judge their relevance, assumptions, and evidence for a particular market or research question.

Key ideas

• Extreme value theory studies unusually large or small observations and has finance applications.
• A general text on extremal events is suggested as an introductory reference.
• A heavy-tail reference offers a more theoretical starting point for EVT.
• Didier Sornette’s research is recommended for work related to financial crashes.
• The document lists resources but does not evaluate their methods or conclusions.

Tags

# Literature recommendation on extreme asset price movements


# Literature recommendation on extreme asset price movements












I'm looking for good papers and books covering extreme stock price movements and mathematical theories of stock market crashs.

## Answer by user30978 (score 4, accepted)

https://quant.stackexchange.com/a/39409

There is a large literature on extreme value theory (EVT) and a sizable subset that concerns its applications in Finance and economics.

A well known reference in the literature is: Modelling extremal events (Read Taleb's review here)

I would suggest you start there to see if you find what you are looking for.

A good reference for 'pure' EVT is Resnick's Heavy Tail Phenomena.

Hope this helps.

## Answer by vonjd (score 4)

https://quant.stackexchange.com/a/39410

I would suggest having a look at the books and papers of Didier Sonette from ETH Zürich.

A good starting point is the research page of his institute.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.