Assessment of Extreme Risk for Egg Price Fluctuation in Henan Province Based on BMM Model

This paper has constructed the methodology of extreme risk assessment of egg price fluctuation based on modern risk analysis and evaluation theory. First of all, the Census-X12 and H-P filter methods are used to periodically decompose the price time series to obtain cyclic and fluctuating components. Block maxima method (BMM) based on the extreme value theory is for modeling the generalized extreme value distribution (GEV) of extreme risk for price fluctuation, and then the problem in what probability distribution of extreme risk for price fluctuation is resolved. The empirical analysis of egg market price in Henan Province, the main egg producing areas in China, show that the egg price fluctuation ratios in Henan province falling into the interval no more than 30 percent from the average which represented a high probability of occurrence whether up or down. The extreme risk of egg price falling in Henan province is generally higher than the extreme risk of rising while the probability of fluctuation ratios falling into extreme interval (40%-50%) is 4.58%, and extreme interval (exceeding 50% from the average) has a relatively small probability of 0.97%.