Revisiting the Edge, Ten Years On

Valérie Chavez, Paul Embrechts
2010
Journal paper

When these lines are written, it is January 21, 2008, a further `Black Monday' on the international markets. Stock indices have fallen between 5 and 10%. Which statistical tools help in describing such events and may help in understanding the consequences? In this article we update our knowledge on the modeling of extremal events, in particular with a view toward applications to finance, insurance, and risk management.

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Related concepts (5)

Extreme weather

Extreme weather includes unexpected, unusual, severe, or unseasonal weather; weather at the extremes of the historical distribution—the range that has been seen in the past. Extreme events are based on a location's recorded weather history. They are defined as lying in the most unusual ten percent (10th or 90th percentile of a probability density function). The main types of extreme weather include heat waves, cold waves and heavy precipitation or storm events, such as tropical cyclones.

Risk management

Risk management is the identification, evaluation, and prioritization of risks (defined in ISO 31000 as the effect of uncertainty on objectives) followed by coordinated and economical application of resources to minimize, monitor, and control the probability or impact of unfortunate events or to maximize the realization of opportunities.

Seven basic tools of quality

The seven basic tools of quality are a fixed set of visual exercises identified as being most helpful in troubleshooting issues related to quality. They are called basic because they are suitable for people with little formal training in statistics and because they can be used to solve the vast majority of quality-related issues. The seven tools are: Cause-and-effect diagram (also known as the "fishbone diagram" or Ishikawa diagram) Check sheet Control chart Histogram Pareto chart Scatter diagram Stratification (alternatively, flow chart or run chart) The designation arose in postwar Japan, inspired by the seven famous weapons of Benkei.