fat tails tail dependence micro correlations fat tails cooke and kousky nsf# 0960865...

Download Fat Tails Tail Dependence Micro Correlations Fat Tails Cooke and Kousky nsf# 0960865 http://www.rff.org/Events/Pages/Introductio n-Climate-Change-Extreme-Events.aspx

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  • Slide 1
  • Fat Tails Tail Dependence Micro Correlations Fat Tails Cooke and Kousky nsf# 0960865 http://www.rff.org/Events/Pages/Introductio n-Climate-Change-Extreme-Events.aspx
  • Slide 2
  • Nice distributions dont surprise Tallest so far Next record Someday, youll meet a taller person Next record
  • Slide 3
  • But Not:
  • Slide 4
  • Catastrophes are Different! Stock market Hurricanes Insurance
  • Slide 5
  • Nice distribution Womens height [cm] Bigger is less bigger Mean excess Average height above heloise Mean excess curve decreasing
  • Slide 6
  • Fat Tails: Natural disasters Average above Heat1 Mean excess curve increasing Worse is more worse Mean Excess
  • Slide 7
  • Fat Tail heuristics US crop insurance claims mean excess Variance is finite Variance is Infinite US crop insurance claims running average Historical averages average out
  • Slide 8
  • Fat Tail Heuristics US Flood Claims per $ Income by County and Year Historical averages just keep growing
  • Slide 9
  • Katrina cost 100$B Whats the chance that the Next Katrina will cost >200$B? Probability that next extreme > 2 x current extreme 100 samples2500 samples Thin tail (exponential) 0.020.0008 Super Fat0.5
  • Slide 10
  • Ask someone from St. Tammany County, LA: After Katrina, flood loss claims in your county totaled $240 per dollar income (2000 dollars); in the next flood at least as bad as Katrina, what do you expect your (2000) dollar loss per dollar income to be?
  • Slide 11
  • Answer: $4,000 US Flood Claims per $ Income by County and Year
  • Slide 12
  • Sobering Data Tail Risk Show http://www.rff.org/News/Features/Pages/Und erstanding-Fat-Tailed-Distributions-and-What- They-Mean-for-Policy.aspx Background on Fat Tail Distributions