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Predictability of fat-tailed extremes

Bódai, T. and Franzke, C. (2017) Predictability of fat-tailed extremes. Physical Review E, 96 (3). 032120. ISSN 1539-3755

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To link to this item DOI: 10.1103/PhysRevE.96.032120

Abstract/Summary

We conjecture for a linear stochastic differential equation that the predictability of threshold exceedances (I) improves with the event magnitude when the noise is a so-called correlated additive-multiplicative noise, no matter the nature of the stochastic innovations, and also improves when (II) the noise is purely additive, obeying a distribution that decays fast, i.e., not by a power law, and (III) deteriorates only when the additive noise distribution follows a power law. The predictability is measured by a summary index of the receiver operating characteristic curve. We provide support to our conjecture—to compliment reports in the existing literature on (II)—by a set of case studies. Calculations for the prediction skill are conducted in some cases by a direct numerical time-series-data-driven approach and in other cases by an analytical or semianalytical approach developed here.

Item Type:Article
Refereed:Yes
Divisions:Faculty of Science > School of Mathematical, Physical and Computational Sciences > Department of Mathematics and Statistics
ID Code:73384
Publisher:American Physical Society

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