fat tails

Extreme Events

I spent yesterday at a conference at RFF on managing “tail risks” — the low-probability but extreme events that are on the tail of the probability distribution.  Some probability distributions have what are called fat tails, meaning that the extreme events are more likely than you would expect from a normal distribution. One way of …


Insurance in a Complex World

Roger Cook and Carolyn Kousky make some intriguing points in an article in the Summer issue of Resources.  They discuss three problems confronting insurance companies, all of them probably exacerbated by climate change: fat tails, tail dependence, and micro-correlations.  Although the names may not be self-explanatory, these are phenomena with great significance for society’s management …