Classification of Polish Fund Market During COVID-19 Pandemic: Extreme Risk Modelling Approach

Risk managers used to deal with the risk of events with low probability of occurrence. Traditional VaR methods ignore extreme events and focus on measures of risk, that is, they concentrate on the empirical distribution of returns. We can use scenario analysis and stress testing, but we cannot explore all possible scenarios. We can simulate the change in portfolio value under the hypothesis that extreme market conditions will occur. We try to deal with these types of problems using EVT, but we know how little we know about the extremes of the distribution of interest. The purpose of this paper is to apply the listed approaches to the assessment of extreme investment risk, using selected mutual funds having pricing in the new technology sector, in the era of the COVID-19 pandemic.