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A User-Friendly Algorithm for Detecting the Influence of Background Risks on a Model

Author

Listed:
  • Nadezhda Gribkova

    (Faculty of Mathematics and Mechanics, St. Petersburg State University, St. Petersburg 199034, Russia)

  • Ričardas Zitikis

    (School of Mathematical and Statistical Sciences, Western University, London, ON N6A 5B7, Canada)

Abstract

Background, or systematic, risks are integral parts of many systems and models in insurance and finance. These risks can, for example, be economic in nature, or they can carry more technical connotations, such as errors or intrusions, which could be intentional or unintentional. A most natural question arises from the practical point of view: is the given system really affected by these risks? In this paper we offer an algorithm for answering this question, given input-output data and appropriately constructed statistics, which rely on the order statistics of inputs and the concomitants of outputs. Even though the idea is rooted in complex statistical and probabilistic considerations, the algorithm is easy to implement and use in practice, as illustrated using simulated data.

Suggested Citation

  • Nadezhda Gribkova & Ričardas Zitikis, 2018. "A User-Friendly Algorithm for Detecting the Influence of Background Risks on a Model," Risks, MDPI, vol. 6(3), pages 1-11, September.
    • Handle: RePEc:gam:jrisks:v:6:y:2018:i:3:p:100-:d:169915
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    References listed on IDEAS

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    Cited by:

    1. Lingzhi Chen & Ričardas Zitikis, 2020. "Quantifying and analyzing nonlinear relationships with a fresh look at a classical dataset of student scores," Quality & Quantity: International Journal of Methodology, Springer, vol. 54(4), pages 1145-1169, August.
    2. Peiheng Gao & Ning Sun & Xuefeng Wang & Chen Yang & Riv{c}ardas Zitikis, 2023. "NLP-based detection of systematic anomalies among the narratives of consumer complaints," Papers 2308.11138, arXiv.org, revised Mar 2024.
    3. Nadezhda Gribkova & Ričardas Zitikis, 2019. "Statistical detection and classification of background risks affecting inputs and outputs," METRON, Springer;Sapienza Università di Roma, vol. 77(1), pages 1-18, April.
    4. Jiandong Ren & Kristina Sendova & Ričardas Zitikis, 2019. "Special Issue “Risk, Ruin and Survival: Decision Making in Insurance and Finance”," Risks, MDPI, vol. 7(3), pages 1-7, September.

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