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Tail fitting, quantile interpolation [16]

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Bullet points include: Suppose want to estimate 99.5%ile, but only have 50 observations (so can’t avoid extrapolation). Say observations come from a GPD with. Expected quantiles shown by blue dashed line. Use TWLS applied to selected distributional families (including GPD) to extrapolate 99.5%ile from 10 highest observations (i.e. top 20 percentiles). Two different random draws (Set A and Set B) each of 50 observations, 99.5%ile is right hand end of chart. GPD good fit for Set A, less good for set B

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