Economics, Econometrics and Finance
2 years ago

New model explains anomalies in extreme value theory for climate and risk management.

arXiv (Cornell University)
The full-tails gamma distribution applied to model extreme values
Joan del Castillo, Jalila Daoudi, Isabel Serra

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The researchers found a way to improve the Pareto distribution by using an extended gamma distribution. This new model helps explain anomalies in extreme value theory and is useful for phenomena like tropical cyclones and operational risk management. The researchers provided two examples of how this new model can be applied to analyze data related to climate variability and aggregate loss distributions.