Exercise

Extreme events during the crisis

You can use the Generalized Extreme Value (GEV) distribution to examine extreme values in the losses of General Electric (GE) during the financial crisis in 2008 and 2009.

This period coincided with GE's liquidity crisis, and its eventual requirement of an emergency investment of $3 billion from Berkshire Hathaway's Warren Buffet to stave off defaulting on its commercial paper obligations.

GE's losses and weekly maximum losses weekly_max are available, as is the GEV genextreme distribution from scipy.stats.

Instructions 1/2

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  • First plot the log daily losses of GE to visually identify parts of the time series that show volatility clustering.
  • Identify those dates which suffered returns losses of more than 10% and add them to your plot.