THE FULL TAILS GAMMA DISTRIBUTION APPLIED TO MODEL EXTREME VALUES

Joan del Castillo, Jalila Daoudi and Isabel Serra

ASTIN Bulletin, 2017, vol. 47, issue 3, 895-917

Abstract: In this paper, we introduce the simplest exponential dispersion model containing the Pareto and exponential distributions. In this way, we obtain distributions with support (0, ∞) that in a long interval are equivalent to the Pareto distribution; however, for very high values, decrease like the exponential. This model is useful for solving relevant problems that arise in the practical use of extreme value theory. The results are applied to two real examples, the first of these on the analysis of aggregate loss distributions associated to the quantitative modelling of operational risk. The second example shows that the new model improves adjustments to the destructive power of hurricanes, which are among the major causes of insurance losses worldwide.

Date: 2017
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