Value-at-Risk and Tsallis statistics: risk analysis of the aerospace sector

TL;DR

This paper analyzes aerospace sector stock prices using Tsallis statistics, introduces a new sector index, and adapts Value-at-Risk methodology to better reflect non-extensive statistical behavior.

Contribution

It introduces a new aerospace sector index and modifies VaR to incorporate Tsallis non-extensive statistics for improved risk assessment.

Findings

The aerospace index follows Tsallis distribution.

Modified VaR better captures risk for non-extensive data.

Tsallis statistics effectively model sector behavior.

Abstract

In this study, we analyze the aerospace stocks prices in order to characterize the sector behavior. The data analyzed cover the period from January 1987 to April 1999. We present a new index for the aerospace sector and we investigate the statistical characteristics of this index. Our results show that this index is well described by Tsallis distribution. We explore this result and modify the standard Value-at-Risk (VaR), financial risk assessment methodology in order to reflect an asset which obeys Tsallis non-extensive statistics.