Abstract:
In the last decade, world financial markets, including the Kenyan market have been characterized by significant
instabilities. This has resulted to criticism on available risk management systems and motivated research on better methods
capable of identifying rare events that have resulted in heavy consequences. With the high volatility of the Kenyan Shilling/Us
dollar exchange rates, it is important to come up with a more reliable method of evaluating the financial risk associated with such
financial data. In the recent past, extensive research has been carried out to analyze extreme variations that financial markets are
subject to, mostly because of currency crises, stock market crashes and large credit defaults. We considered the behavior of the
tails of financial series. More specially was focus on the use of extreme value theory to assess tail-related risk; we thus aim at
providing a modeling tool for modern risk management. Extreme Value Theory provides a theoretical foundation on which we can
build statistical models describing extreme events. This will help in predictability of such future rare events
