Prof. Dr. Holger Dette, Dr. Axel Bücher und Dr. Stanislav Volgushev from the Institute of Statistics (Faculty of Mathematics at the Ruhr-Universität) published their findings in the prestigious scientific journal “The Annals of Statistics”.
No more tasty surprises
Calculating the probability of extreme events
RUB mathematicians develop new statistical method
It had to happen: the property bubble burst and the global financial market experienced its biggest crisis in the last hundred years. In retrospect, many suspected it was coming, but nobody could have known for sure. The traditional investment strategy failed, as all forms of investment suddenly collapsed at the same time. In order to calculate the probability of several such extreme events occurring at the same time, three scientists at the RUB have developed a new method. Prof. Dr. Holger Dette, Dr. Axel Bücher und Dr. Stanislav Volgushev from the Institute of Statistics (Faculty of Mathematics at the Ruhr-Universität) published their findings in the prestigious scientific journal “The Annals of Statistics”.
Big things start small
Up to now, when statisticians estimated the probabilities of extreme events, they usually calculated with dependencies between the outliers of statistical series. The outliers, however, make up the smallest part of a data set, e.g. the largest 100 out of 3,600 data. That means they ignore the dependencies of the bulk of the relevant data set, namely 3,500 data, and thus take the risk that important information is lost. Axel Bücher shows how this problem can be solved: “Our work provides a decision aid as to whether it is better to use the full range of data and not only the outliers. If all the data are relevant, then they should all be included. However, this is not always the case. Sometimes these data would falsify the result.”
The researchers use the copula function for the evaluation. “This is a complicated, multi-dimensional function, which characterises stochastic dependencies between the data” explains Stanislav Volgushev. With this aid, a few years ago we might have noticed that many little termites were nibbling their way into the wooden foundation of the global financial market, whilst we were on the look out for large predators.
Financial crises as motivation for research
“Our research is strongly motivated by the recent financial crises. At that time, almost all the economic models and forecasting tools for loan losses failed because they did not pay sufficient attention to extreme dependencies. In the long run, we aim to develop models and methods that predict such events better” says Prof. Dette, explaining the reason for their research. For several years, the three researchers have been looking into new methods of asymptotic statistics which work with sample sizes approaching infinity. They are financed by the German Research Foundation (DFG) in the Collaborative Research Centre SFB 823 “Statistical modelling of nonlinear dynamic processes”. The English-language publication bears the title “New estimators of the Pickands dependence function and a test for extreme-value dependence”.
Axel Bücher, Holger Dette, Stanislav Volgushev: “New estimators of the Pickands dependence function and a test for extreme-value dependence”, in: “The Annals of Statistics”, Volume 39, Number 4, 2011. doi: 10.1214/11-AOS890
Prof. Dr. Holger Dette, Institute of Statistics, Faculty of Mathematics at the RUB, tel. +49 234 32 28284, email@example.com
Editor: Tabea Steinhauer
More articles from Statistics:
More than 400,000 higher education graduates in 2012
17.09.2013 | Statistisches Bundesamt
Share of women among professors increases to over 20% in 2012
11.07.2013 | Statistisches Bundesamt
International team of scientists develops new feedback method for optimizing the laser pulse shapes used in the control of chemical reactions
In many ways, traditional chemical synthesis is similar to cooking. To alter the final product, you can change the ingredients or their ratio, change the method of mixing ingredients, or change the temperature or pressure of the environment of the ingredients.
Like an accomplished chef, chemists have become very skilled ...
A genetic defect protects mice from infection with influenza viruses
A new study published in the scientific journal PLOS Pathogens points out that mice lacking a protein called Tmprss2 are no longer affected by certain flu viruses.
The discovery was made by researchers from the Helmholtz Centre for Infection Research (HZI) in Braunschweig in collaboration with colleagues from Göttingen and ...
The Light: Global study gets underway with online user survey
Light has a fundamental impact on our sense of well-being and performance. In cooperation with Zumtobel, a supplier of lighting solutions, Fraunhofer IAO has launched a global user survey of lighting quality in offices. The objective is to identify the best lighting conditions for a variety of spaces and lighting ...
Quantum entanglement, a perplexing phenomenon of quantum mechanics that Albert Einstein once referred to as “spooky action at a distance,” could be even spookier than Einstein perceived.
Physicists at the University of Washington and Stony Brook University in New York believe the phenomenon might be intrinsically linked with wormholes, hypothetical features of space-time that in popular science fiction can provide a much-faster-than-light shortcut from one part of the universe to another.
But here’s the catch: One couldn’t actually ...
A star is formed when a large cloud of gas and dust condenses and eventually becomes so dense that it collapses into a ball of gas, where the pressure heats the matter, creating a glowing gas ball – a star is born.
New research from the Niels Bohr Institute, among others, shows that a young, newly formed star in the Milky Way had such an explosive growth, that it was initially about 100 times brighter than it is now. The results are published in the scientific journal, Astrophysical Journal Letters.
The young ...
06.12.2013 | Materials Sciences
06.12.2013 | Life Sciences
06.12.2013 | Life Sciences
05.12.2013 | Event News
04.12.2013 | Event News
12.11.2013 | Event News