Extreme value theory

Extreme value theory is a branch of statistics dealing with the extreme deviations from the mean of probability distributions. Extreme value theory is important for assessing risk for highly unusual events, such as 100-year floods.

Applications of extreme value theory:

• predicting extreme floods
• predicting the amounts of large insurance losses
• predicting equity risks

History of extreme value theory

Founded by the German mathematician, pacifist, and anti-Nazi campaigner Emil Julius Gumbel who described the Gumbel distribution in the 1950s.

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References:

• Gumbel, E.J.(1958). Statistics of Extremes. Columbia University Press.

See also:

• Hydrogeology, Meteorology, extreme weather

External links:

• Extreme value theory group at Chalmers University
• The Extreme Value Approach to VaR – An Introduction
• Extreme Value Theory for Tail-Related Risk Measures
• Extreme value theory an empirical analysis of equity risk
• http://www.itl.nist.gov/div898/handbook/apr/section1/apr163.htm