Fat-Tailed and Skewed Asset Return Distributions: Implications for Risk Management, Portfolio Selection, and Option Pricing

Fat-Tailed and Skewed Asset Return Distributions

While mainstream financial theories and applications assume that asset returns are normally distributed, the overwhelming empirical evidence shows otherwise. Yet many professionals fail to appreciate the highly statistical models that take this empirical evidence into consideration.

Svetlozar Rachev, Christian Menn, and Frank Fabozzi understand this dilemma, and in Fat-Tailed and Skewed Asset Return Distributions, they offer you a less technical look at how portfolio selection, risk management, and option pricing modeling should and can be undertaken when the assumption of a non-normal distribution for asset returns is violated.

Topics covered in this comprehensive book include:

• An extensive discussion of probability distributions used in finance
• Estimating probability distributions
• The basics of stochastic processes
• Portfolio selection and alternative risk measures
• Market, credit, and operational risk measurement
• Black-Scholes option pricing model and its extensions when the model's assumptions are modified to meet the empirical distributional evidence and tests
• And much more

Fat-Tailed and Skewed Asset Return Distributions provides a bridge between the highly technical theory of statistical distributional analysis, stochastic processes, and econometrics of financial returns and real-world risk management and investments.