Fat Tails and Extreme Events [16]

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Bullet points include: Book suggests how to refine quantile-quantile plots to show joint (here 2 risk) extreme behaviour. Uses ‘upwards’ QQ plots (right half corresponds to X(i), left half to –X(i)). Then create surface plot that encapsulates upwards QQ plots for all (linear) combinations of X and Y, relevant combination given by angle of rotation around centre. Encapsulates in a single chart fat-tailed behaviour arising from co-dependency characteristics and marginal distributions. Like a one-dimensional QQ plot, places greater visual emphasis on extreme events

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