Risk Modeling for Asset Returns with Stable Pareto Distribution and Mathematica Code

Abstract

In sciences, it is known that normal distribution is often assumed, but there are fields where kurtosis or skewness effect happens for instance in financial markets. So we shall consider where does it come from? At this point we can consider for example Minsky instability hypothesis, but at the same time from practical view point, there is the black swan hypothesis of Nassim N. Taleb. We shall consider therefore how to consider risk modeling of asset returns with stable Pareto distribution. An outline of Mathematica code has been given too.  In finance, accurately modeling asset returns is crucial for risk management and investment decisions.