Economic Peaks and Value-at-Risk Analysis: A Novel Approach Using the Laplace Distribution for House Prices, By Morad Alizadeh

Research

Title	Economic Peaks and Value-at-Risk Analysis: A Novel Approach Using the Laplace Distribution for House Prices
Type	Article
Keywords	Laplace; odd log-logistic; economic risk; extreme house price data; mean of order-P; peaks over a random threshold; value-at-risk; tail behavior
Journal	MATHEMATICAL AND COMPUTATIONAL APPLICATIONS
DOI	https://doi.org/10.3390/mca30010004
Researchers	Jondeep Das (First researcher) , Partha Jyoti Hazarika (Second researcher) , Morad Alizadeh (Third researcher) , Javier E. Contreras-Reyes (Fourth researcher) , Hebatallah H. Mohammad (Fifth researcher) , Haitham Yousof (Not in first six researchers)

Abstract

In this article, a new extension of the standard Laplace distribution is introduced for house price modeling. Certain important properties of the new distribution are deducted throughout this study. We used the new extension of the Laplace model to conduct a thorough economic risk assessment utilizing several metrics, including the value-at-risk (VaR), the peaks over a random threshold value-at-risk (PORT-VaR), the tail value-at-risk (TVaR), the mean of order-P (MOP), and the peaks over a random threshold based on the mean of order-P (PORT-MOP). These metrics capture different facets of the tail behavior, which is essential for comprehending the extreme median values in the Boston house price data. Notably, PORT-VaR improves the risk evaluations by incorporating randomness into the selection of the thresholds, whereas VaR and TVaR focus on measuring the potential losses at specific confidence levels, with TVaR offering insights into significant tail risks. The MOP method aids in balancing the reliability goals while optimizing the performance in the face of uncertainty.