Extreme Value Theory Approach to Simultaneous Monitoring and Thresholding of Multiple Risk Indicators
AbstractRisk assessments often encounter extreme settings with very few or no occurrences in reality.Inferences about risk indicators in such settings face the problem of insufficient data.Extreme value theory is particularly well suited for handling this type of problems.This paper uses a multivariate extreme value theory approach to establish thresholds for signaling levels of risk in the context of simultaneous monitoring of multiple risk indicators.The proposed threshold system is well justified in terms of extreme multivariate quantiles, and its sample estimator is shown to be consistent.As an illustration, the proposed approach is applied to developing a threshold system for monitoring airline performance measures.This threshold system assigns different risk levels to observed airline performance measures.In particular, it divides the sample space into regions with increasing levels of risk.Moreover, in the univariate case, such a thresholding technique can be used to determine a suitable cut-off point on a runway for holding short of landing aircrafts.This cut-off point is chosen to ensure a certain required level of safety when allowing simultaneous operations on two intersecting runways in order to ease air traffic congestion.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2006-104.
Date of creation: 2006
Date of revision:
Contact details of provider:
Web page: http://center.uvt.nl
Extreme value theory; extreme quantile; multiple risk indicators; multivariate quantile; rare event; statistics of extremes; threshold system;
Find related papers by JEL classification:
- C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
- C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- L93 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Air Transportation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-11-18 (All new papers)
- NEP-ECM-2006-11-18 (Econometrics)
- NEP-RMG-2006-11-18 (Risk Management)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Einmahl, J.H.J. & Haan, L.F.M. de & Li, D., 2004. "Weighted Approximations of Tail Copula Processes with Application to Testing the Multivariate Extreme Value Condition," Discussion Paper 2004-71, Tilburg University, Center for Economic Research.
- Einmahl, J. & Dekkers, A. & de Haan, L., 1989. "A moment estimator for the index of an extreme-value distribution," Open Access publications from Tilburg University urn:nbn:nl:ui:12-125712, Tilburg University.
- Dehaan, L. & Huang, X., 1995. "Large Quantile Estimation in a Multivariate Setting," Journal of Multivariate Analysis, Elsevier, vol. 53(2), pages 247-263, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Richard Broekman).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.