# Beyond tail median and conditional tail expectation: extreme risk estimation using tail $Lp$ −optimisation

2 MISTIS - Modelling and Inference of Complex and Structured Stochastic Systems
Inria Grenoble - Rhône-Alpes, LJK - Laboratoire Jean Kuntzmann, INPG - Institut National Polytechnique de Grenoble
Abstract : The Conditional Tail Expectation is an indicator of tail behaviour that takes into account both the frequency and magnitude of a tail event. However, the asymptotic normality of its empirical estimator requires that the underlying distribution possess a finite variance; this can be a strong restriction in actuarial and financial applications. A valuable alternative is the Median Shortfall, although it only gives information about the frequency of a tail event. We construct a class of tail L p −medians encompassing the Median Shortfall and Conditional Tail Expectation. For p in (1, 2), a tail L p −median depends on both the frequency and magnitude of tail events, and its empirical estimator is, within the range of the data, asymptotically normal under a condition weaker than a finite variance. We extrapolate this estimator and another technique to extreme levels using the heavy-tailed framework. The estimators are showcased on a simulation study and on real fire insurance data.
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Cited literature [47 references]

https://hal.inria.fr/hal-01726328
Contributor : Stephane Girard <>
Submitted on : Thursday, November 7, 2019 - 9:21:24 AM
Last modification on : Saturday, November 9, 2019 - 1:14:04 AM

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• HAL Id : hal-01726328, version 4

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Laurent Gardes, Stephane Girard, Gilles Stupfler. Beyond tail median and conditional tail expectation: extreme risk estimation using tail $Lp$ −optimisation. Scandinavian Journal of Statistics, Wiley, In press, pp.1-69. ⟨hal-01726328v4⟩

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