Bayesian estimation of the threshold of a generalised Pareto distribution for heavy-tailed observations
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Publication:2398080
Abstract: In this paper, we discuss a method to define prior distributions for the threshold of a generalised Pareto distribution, in particular when its applications are directed to heavy-tailed data. We propose to assign prior probabilities to the order statistics of a given set of observations. In other words, we assume that the threshold coincides to one of the data points. We show two ways of defining a prior: by assigning equal mass to each order statistic, that is a uniform prior, and by considering the worth that every order statistic has in representing the true threshold. Both proposed priors represent a scenario of minimal information, and we study their adequacy through simulation exercises and by analysing two applications from insurance and from finance.
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Cited in
(8)- An extreme value Bayesian Lasso for the conditional left and right tails
- Exact posterior distribution for nonconjugate Pareto models
- Bayesian nonparametrics for heavy tailed distribution. Application to food risk assessment
- On the composite Lognormal–Pareto distribution with uncertain threshold
- A method for choosing an optimum threshold if the underlying distribution is generalised Burr-gamma
- Quasi-conjugate Bayes estimates for GPD parameters and application to heavy tails modelling
- A default Bayesian procedure for the generalized Pareto distribution
- Thresholding procedure with priors based on Pareto distributions
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