Extreme shock models: An alternative perspective

Pasquale Cirillo and Jürg Hüsler

Statistics & Probability Letters, 2011, vol. 81, issue 1, 25-30

Abstract: Extreme shock models have been introduced in Gut and Hüsler (1999) to study systems that at random times are subject to a shock of random magnitude. These systems break down when the shock overcomes a given resistance level. In this paper we propose an alternative approach to extreme shock models using reinforced urn processes. As a consequence of this we are able to look at the same problem under a Bayesian nonparametric perspective, providing the predictive distribution of systems' defaults.

Keywords: Extreme; shock; models; Urn; models; Default; probability (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (10)

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