Beyond the sample: extreme quantile and probability estimation

Danielsson, Jon ORCID: 0009-0006-9844-7960 and Vries, Casper (1998) Beyond the sample: extreme quantile and probability estimation. Financial Markets Group Discussion Papers (298). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

Economic problems such as large claims analysis in insurance and value-at-risk in fi- nance, 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 sub- sample 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.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 1998 The Authors
Divisions:	Finance
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods: General > C14 - Semiparametric and Nonparametric Methods
Date Deposited:	05 Jul 2023 08:57
Last Modified:	11 Dec 2024 19:47
URI:	http://eprints.lse.ac.uk/id/eprint/119141

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