Extreme Value Statistics
Definition of the Subject
Extreme value theory is concerned with the statisticalproperties of the extreme events related to a random variable(see Fig. 1), and theunderstanding and applications of their probability distributions. Themethods and the practical use of such a theory have beendeveloped in the last 60 years, though, many complex real‐lifeproblems have only recently been tackled. Many disciplines use thetools of extreme value theory including meteorology, hydrology, oceanwave modeling, and finance to name just a few.
For example, in economics, extreme value theory is currently used by actuaries to evaluate and price insurance against the probability of rare but financially catastrophic events. An other application is for the estimation of Value at Risk. In hydrology, the theory is applied by environmental risk agencies to calculate, for example, the height of sea‐walls to prevent flooding. Similarly, extreme value theory is also used to set strength boundaries in engineering...
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