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Tail fitting, quantile interpolation [9]

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Bullet points include: Suppose interested in risk measures relating to losses. EVT aims to supply two closely related results: Less relevant to risk management: Distribution of ‘block maxima’ (or ‘block minima’), i.e. maximum value in blocks of observations, tends to a generalised extreme value (GEV) distribution. More relevant to risk management: Distribution of ‘threshold exceedances’ (i.e. ‘peaks-over-thresholds’) tends to a generalised Pareto distribution (GPD), Here u is a predetermined high threshold and we focus on realisations that exceed u, which if EVT applies means that their distribution has a suitable cumulative distribution function

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