Estimating the Tails of Loss Severity Distributions Using Extreme Value Theory
Open Access
- 1 May 1997
- journal article
- Published by Cambridge University Press (CUP) in ASTIN Bulletin
- Vol. 27 (1) , 117-137
- https://doi.org/10.2143/ast.27.1.563210
Abstract
Good estimates for the tails of loss severity distributions are essential for pricing or positioning high-excess loss layers in reinsurance. We describe parametric curve-fitting methods for modelling extreme historical losses. These methods revolve around the generalized Pareto distribution and are supported by extreme value theory. We summarize relevant theoretical results and provide an extensive example of their application to Danish data on large fire insurance losses.Keywords
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