Apply the Generalized Extreme Value and the Generalized Pareto distributions to the estimation of tail risk measures and probabilities.
Free SOA Exam ASTAM (Advanced Short-Term Actuarial Mathematics) lesson in Severity Models. 26 min read, ~3,927 words.
GEV fits block maxima with parameters: location, scale, shape. Shape sign: Fréchet (heavy), Gumbel (light), reverse-Weibull bounded at. GPD fits exceedances with, using data more efficiently than block maxima; same as the parent GEV. VaR tail formula (GPD):. TVaR closed form (GPD, ):. Mean of GPD excess exists only when...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Common Mistakes
- Check Your Understanding
- Exam Shortcuts
Learning objectives
- 1f
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