Measuring event risk

Abstract

This paper measures event risk which is introducing by the ball committee to measure the effect of sudden news. This study calculates event risk by using the data of registered firms in Tehran stock market between 1993 and 1994. For computing event risk, we use daily market capitalization for 80 firms during 1993-2009, then dividing these firms to three baskets; big, medium and small. The Model comes from the family of GARCH models and inverse Gaussian (IG) that is obtained from combination of GARJI distribution and normal distribution. Poisson distribution used for modeling of sudden news entry to the market.The conclusions show the importance of event risk as an important component of total risk. we computes Event risk for the medium basket about 5 percent and for the big basket about 2 percent.

Keywords

• "event risk"
• "jumps"
• "nig distribution"
• "value at risk"