Second-order refined peaks-over-threshold modelling for heavy-tailed distributions

By Jan Beirlant, E. Joossens, Johan Segers. 2009

63 citations recorded by the source corpus.

Modelling excesses over a high threshold using the Pareto or generalized Pareto distribution (PD/GPD) is the most popular approach in extreme value statistics. This method typically requires high thresholds in order for the (G)PD to fit well and in such a case applies only to a small upper fraction of the data. The extension of the (G)PD proposed in this paper is able to describe the excess distribution for lower thresholds in case of heavy tailed distributions. This yields a statistical model that can be fitted to a larger portion of the data. Moreover, estimates of tail parameters display stability for a larger range of thresholds. Our findings are supported by asymptotic results, simulations and a case study.

Subfields: Finance, Global and Planetary Change, Statistics and Probability

View Paper: https://www.semanticscholar.org/paper/ca0095fff0ec0f719c3713e5839d98099b77b7c9