Extreme value theory is a branch of statistics that deals with extreme values. Standard statistical methods tend to be oriented towards measuring values somewhere near average. Extreme value theory is a special class of methods that attempt to estimate the probability of distant outliers. One such method is known as Fisher–Tippett–Gnedenko theorem, or simply the extreme value theorem.
Risk management makes use of extreme value theory to estimate risks that have low probability but high impact such as large earthquakes, hurricanes, rogue waves, forest fires, market collapses, disasters and pipeline failures. Extreme value theory can also be used to calculate the probability of positive things such as the rare stocks that eventually appreciate in price by 100x or more.
Risks
This is the complete list of articles we have written about risks.
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A list of common business risks.
The four things that can be done about risk.
A metric for measuring risk management.
The potential that you'll achieve too much of a good thing.
Any risk that people have a strong aversion too.
The definition of risk taking with examples.
A list of risk examples by type.
The two main factors in modeling a risk.
A definition of calculated risk with an example.
How to calculate relative risk with examples.
A list of basic statistical analysis techniques.
The use of behavioral analytics to study the behavior of a particular group of people, known as a cohort.
A definition of analytics with examples.
The difference between continuous and discrete data.
The common types of hypothesis with examples.
The definition of negative correlation with examples.
The common types of error with examples.
An overview of structured data with examples.
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