Extreme Events and Extreme Value Theory (EVT) [9]

Go to: Summary | Previous | Next   
Bullet points include: Fat tails involve deviation from normality, so some higher cumulants (moments), aka semi-invariants, e.g. skew and (excess) kurtosis, deviate from zero (normality). Cornish-Fisher asymptotic expansion (4th moment version) regularly appears in risk management literature. Estimates distributional form from first 4 moments, i.e.: In effect results in standardised QQ-plot being estimated via a cubic equation and can overstate fat-tailed behaviour in tails

Contents | Prev | Next | ERM Lecture Series

Desktop view | Switch to Mobile