Analysis of extreme events [48]

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Bullet points include: Very widely observed phenomenon E.g. draw X with prob p from N1 and prob (1-p) from N2 Quite different behaviour to linear combination mixtures, i.e. a.X1 + b.X2 If N1 and N2 have same mean but different s.d.’s then distributional mixture fat-tailed (if p NE 0 or 1) but linear combination mixture isn’t.Time-varying volatility is similar, involves draws from different distributions at different times

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