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.

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