2023 CMS Summer Meeting

Ottawa, June 2 - 5, 2023


Krieger-Nelson Prize

Extreme or not extreme: the intricacies and challenges of rare event modeling  [PDF]

Accounting for dependence between rare events such as severe storms, floods, or large financial losses is essential for sound risk management. This can be accomplished very effectively by combining extreme-value theory with copula modeling, and by relying on the component-wise ranks of multivariate data to make inference. I will first explain how copulas can adequately capture the dependence between extreme events when the commonly used asymptotic extreme-value models are unsuitable. As extending these ideas to a large collection of risks calls for hierarchical models, I will next show how their structure might be inferred by identifying patterns in large-scale rank correlation matrices. Finally, I will use some of these techniques to explore the behavior of the largest claim size in a portfolio of possibly dependent insurance claims.

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