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Beyond the Sample: Extreme Quantile and Probability Estimation

Listed author(s):
  • Jon Danielsson


  • Casper G. de Vries

Economic problems such as large claims analysis in insurance and value-at-risk in finance, require assessment of the probability P of extreme realizations Q. This paper provides a semi-parametric method for estimation of extreme (P,Q) combinations for data with heavy tails. We solve the long standing problem of estimating the sample threshold of where the tail of the distribution starts. This is accomplished by the combination of a control variate type device and a subsample bootstrap technique. The subsample bootstrap attains convergence in probability, whereas the full sample bootstrap would only provide convergence in distribution. This permits a complete and comprehensive treatment of extreme (P,Q) estimation.

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Paper provided by Financial Markets Group in its series FMG Discussion Papers with number dp298.

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Date of creation: Jul 1998
Handle: RePEc:fmg:fmgdps:dp298
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