Extreme Events and Extreme Value Theory (EVT) [35]

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Bullet points include: There is a natural analogy between insurance losses such as these and operational risk losses. Especially if risks included in insurance coverage and or captive reinsurance programmes. Although not perfect analogy, see Session on Operational Risk. C.f. super large operational losses. E.g. Deepwater Horizon oil rig blowout (BP). How ‘specific’ to the company are such losses? Depending on tail index, distributions may have infinite variance. And, if extreme enough, infinite mean!

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