Coles and Davison - Statistical Modelling of Extreme Values - June 2008

Statistical Modelling of Extreme Values
Stuart Coles and Anthony Davison

c
2008
Based on An Introduction to Statistical Modeling of Extreme Values,
by Stuart Coles, Springer, 2001
http://stat.epfl.ch
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Introduction
Basic problem.
Applications . .
Examples . . . .
Brief history . .
Resources. . . .
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Basic Notions
Principles of Stability. . . . . . . . . . . . . . . . . . . . . .
Probability framework for block maxima distribution.
Classical limit laws . . . . . . . . . . . . . . . . . . . . . . .
Extremal types theorem . . . . . . . . . . . . . . . . . . . .
Using the limit law . . . . . . . . . . . . . . . . . . . . . . .
Generalized extreme value distribution . . . . . . . . . .
Quantiles and return levels . . . . . . . . . . . . . . . . . .
Max-stability . . . . . . . . . . . . . . . . . . . . . . . . . . .
Outline proof of GEV as limit law . . . . . . . . . . . . .
Domains of attraction . . . . . . . . . . . . . . . . . . . . .
Convergence and approximation . . . . . . . . . . . . . .
Minima . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Likelihood . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest and nuisance parameters . . . . . . . . . . . . . .
Modelling with the GEV. . . . . . . . . . . . . . . . . . . .
Port Pirie Annual Maxima data . . . . . . . . . . . . . . .
Bayesian Extremes. . . . . . . . . . . . . . . . . . . . . . . .
MCMC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
MetropolisHastings . . . . . . . . . . . . . . . . . . . . . .
Port Pirie: MCMC analysis . . . . . . . . . . . . . . . . . .
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3
. 4
. 5
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15
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17
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Limitations of the GEV limit law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Point Process Approach
Improved Inferences . . . . . . . . . .
Example: Eskdalemuir rainfall . . .
Poisson process . . . . . . . . . . . . .
Statistical application. . . . . . . . .
Likelihood . . . . . . . . . . . . . . . .
Example: Eskdalemuir rainfall . . .
Threshold methods . . . . . . . . . .
Alternative inference . . . . . . . . .
Mean residual life plot . . . . . . . .
Threshold selection . . . . . . . . . .
rlargest order statistics method .
Venice Sea Levels . . . . . . . . . . .
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Modelling Issues
D(un ) condition . . . . . . . . . . . . . .
Short-term dependence: Example . .
Moving maxima . . . . . . . . . . . . . .
Extremal index . . . . . . . . . . . . . . .
D. . . . . . . . . . . . . . . . . . . . . . . .
Modelling. . . . . . . . . . . . . . . . . . .
Wooster example . . . . . . . . . . . . .
Return levels . . . . . . . . . . . . . . . .
Rain example . . . . . . . . . . . . . . . .
Non-stationarity . . . . . . . . . . . . . .
Estimation . . . . . . . . . . . . . . . . . .
Model reduction . . . . . . . . . . . . . .
Other extreme value models . . . . . .
Examples . . . . . . . . . . . . . . . . . . .
Semiparametric . . . . . . . . . . . . . . .
Example: Swiss winter temperatures
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.
Multivariate Extremes
Multivariate extremes . . . .
Componentwise maxima . . .
Special cases . . . . . . . . . .
Parametric models. . . . . . .
Alternatives . . . . . . . . . . .
Inference . . . . . . . . . . . . .
Structure variables. . . . . . .
Sea levels . . . . . . . . . . . . .
Point process . . . . . . . . . .
Comments . . . . . . . . . . . .
Consistency of results . . . .
Poisson likelihood . . . . . . .
Exchange rate data . . . . . .
Oceanographic example . . .
Higher-dimensional models .
Asymptotic dependence . . .
Bivariate normal variables . .
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51
52
53
57
61
62
63
66
67
69
70
71
72
73
75
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78
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85
86
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95
96
105
107
111
112
113
116
117
118
119
120
122
126
129
130
131
133
137
140
141
142
Spatial Extremes
143
Spatiotemporal extremes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144
Geostatistics
Geostatistics . . . . . . . . . . . . . .
Temperature data . . . . . . . . . .
Approaches . . . . . . . . . . . . . .
Latent variable approach . . . . .
HeffernanTawn (2004) . . . . . .
Max-stable processes . . . . . . . .
Extremal coefficient . . . . . . . . .
Madogram . . . . . . . . . . . . . . .
Spectral representations I . . . . .
Spectral representations II . . . .
Pairwise likelihood. . . . . . . . . .
Example: Temperature data . . .
Swiss summer temperature data
Fit of marginal model . . . . . . .
Estimated correlations . . . . . . .
Fit of correlation curve. . . . . . .
Pairwise fits . . . . . . . . . . . . . .
Simulated fields . . . . . . . . . . .
......................
......................
......................
Discussion . . . . . . . . . . . . . . .
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145
145
146
149
150
151
152
153
154
155
156
157
158
159
160
161
162
163
164
165
166
167
168
Overview
1. Basic notions: maximum analysis, and threshold models
2. Alternative charactizationsimproved inferences
3. Modelling issues
4. Multivariate extremes
5. Spatial models for extremes
Statistics of Extremes
January 2008 slide 2
Introduction
slide 3
Basic problem
iid
Simplest case: X1 , . . . Xn F . Require accurate inferences on tail of F .

Key issues:
there are very few observations in the tail of the distribution;
estimates are often required beyond the largest observed data value;
standard density estimation techniques fit well where the data have greatest density, but can be
severely biased in estimating tail probabilities.
Usual lack of physical or empirical basis for extrapolation leads to the extreme value paradigm:
Base tail models on asymptotically-motivated distributions.
Applications
Historically there have been two main application areas of extreme value theory:
Environmental:
sea levels
wind speeds
pollution concentrations
river flow
...
Reliability Modelling:
weakest-link type models
Growing areas of application include: finance, insurance, telecommunications, athletic records,

microarrays, . . .
4.2
4.0
3.6
3.8
Sea-Level (metres)
4.4
4.6
Examples: Annual maximum sea levels
1930
1940
1950
1960
1970
1980
Year
Annual maximum sea levels at Port Pirie, Western Australia.

15
10
0
Frequency
20
25
Examples: Breaking strengths of glass fibres
0.0
0.5
1.0
1.5
2.0
2.5
Breaking Strength
Here minima are of interest.

1.6
1.2
1.4
Sea-level (meters)
1.8
Examples: Dependence on covariates
1900
1920
1940
1960
1980
Year
1.6
1.2
1.4
Sea-level (meters)
1.8
Fremantle annual maximum sea levels: apparent trend in time.
-1
SOI
Apparent dependence on the Southern Oscillation Index (an indicator of El Nino).

240
238
232
234
236
Race Time (secs.)
242
244
246
Examples: Fastest annual times for womens 1500m
1975
1980
1985
1990
Year
There is an obvious time trend.

140
120
60
80
100
Sea-level (cm)
160
180
200
Examples: Largest order statistics
1930
1940
1950
1960
1970
1980
Year
Largest ten (available) annual sea levels at Venice.

40
0
20
Daily Rainfall (mm)
60
80
Examples: Threshold exceedances
1920
1930
1940
1950
1960
Year
Daily rainfall accumulation (location in south-west England)

0
-20
-40
-60
Daily Minimum Temperature (Degrees Below 0 F.)
20
Examples: Nonstationarity
1983
1984
1985
1986
1987
1988
Year
Daily minimum temperatures (Wooster, Canada).

Index
-0.02
-0.06
6000
-0.04
8000
Index
0.0
10000
0.02
0.04
12000
Examples: Financial time series
1996
1997
1998
1999
2000
1996
Year
1997
1998
1999
2000
Year
Dow Jones Index. (Left Panel: Raw. Right Panel: After transformation to induce approximate
stationarity)
65
60
55
50
45
40
Annual Maximum Wind Speed (knots) at Hartford (CT)
Examples: Multivariate extremes
50
60
70
80
Annual Maximum Wind Speed (knots) at Albany (NY)
Annual maximum wind speeds at 2 different locations (North East U.S.)

Brief history
1920s: Foundations of asymptotic argument developed by Fisher and Tippett
1940s: Asymptotic theory unified and extended by Gnedenko and von Mises
1950s: Use of asymptotic distributions for statistical modelling by Gumbel and Jenkinson
1970s: Classic limit laws generalized by Pickands
1980s: Leadbetter (and others) extend theory to stationary processes
1990s: Multivariate and other techniques explored as a means to improve inference
2000s: Interest in spatial and spatio-temporal applications, and in finance
Resources
Books
Galambos (1987) The Asymptotic Theory of Extreme Order Statistics, Krieger
Resnick (1987) Extreme Values, Regular Variation, and Point Processes, SV
Leadbetter, Lindgren and Rootzen (1983) Extremes and Related Properties of Random Sequences and Processes,
SV
de Haan and Ferreira (2006) Extreme Value Theory: An Introduction, SV

Gumbel (1958) Statistics of Extremes, Columbia University Press
Embrechts, Kl
uppelberg and Mikosch (1997) Modelling Extreme Events for Insurance and Finance, SV
Kotz and Nadarajah (2000) Extreme Value Distributions, Imperial College Press
Coles (2001) An Introduction to Statistical Modelling of Extreme Values, SV
Beirlant, Goegebeur, Segers, and Teugels (2004) Statistics of Extremes: Theory and Applications, Wiley
Finkenst
adt and Rootzen (2004) Extreme Values in Finance, Telecommunications and the Environment, CRC
Reiss and Thomas (2007) Statistical Analysis of Extreme Values, Birkhauser
R packages evd, evdbayes, evir, extRemes, fExtremes, POT
Journal Extremes (published by Springer)
Basic Notions
slide 17
Principles of Stability
Fundamental to all characterizations of extreme value processes is the concept of stability.
For example, we might propose one model for the annual maximum of a process, and another for
the 5-year maximum. Since the 5-year maximum will be the maximum of 5 annual maxima, the
models should be mutually consistent.
Similarly, a model for exceedances over a high threshold should remain valid (in a precise sense)
for exceedances of higher threshold.
The expression of such stability requirements as mathematical statements leads to asymptotic

models.
Probability framework for block maxima distribution

iid
Let X1 , . . . , Xn F and define

Mn = max{X1 , . . . , Xn }.
Then the distribution function of Mn is
Pr{Mn x} = Pr{X1 x, . . . , Xn x}
= Pr{X1 x} Pr{Xn x}
= F (x)n .
But F is unknown, so approximate F n by limit distributions as n.
What distributions can arise?
Obviously, if F (x) < 1, then F (x)n 0, as n .
Classical limit laws

Question, as stated, is trivial: Mn will converge to the upper endpoint of the distribution of X as
n. But
recall the Central Limit Theorem: with n = and n = / n,

X n n
N (0, 1),
n
so rescaling is needed to obtain a non-degenerate limit.
Same applies here: we seek limits of

Mn bn
an
for suitable sequences {an } > 0 and {bn }.
10
Extremal types theorem

Definition 1 The distributions F and F are of the same type if there are constants a > 0 and b such that
F (ax + b) = F (x) for all x.
Theorem 2 (Extremal types theorem) If there exist sequences of constants an > 0 and bn such that, as n ,
Pr{(Mn bn )/an x} G(x)
for some nondegenerate distribution G, then G has the same type as one of the following distributions:
I : G(x)
II : G(x)
III : G(x)
exp{ exp(x)}, < x < ;
0,
x 0,
exp(x ),
x > 0, > 0;
exp{(x) }, x < 0, > 0,

1,
x 0.
Conversely, each of these Gs may appear as a limit for the distribution of (Mn bn )/an , and does so when G itself is
the distribution of X.
Three limiting distributions

Frechet, alpha=0.5
Negative Weibull, alpha=0.5
10
0
x
10
0.3
PDF
0.2
0.1
0.0
0.0
0.0
0.1
0.1
PDF
0.2
PDF
0.2
0.3
0.3
0.4
0.4
Gumbel
10
0
x
10
10
0
x
10
The three types are known as the Gumbel, Fr

echet and Weibull (strictly, negative Weibull),
respectively.
The Frechet (Type II) is bounded below, and the negative Weibull (Type III) is bounded above.
The standard Weibull is a distribution for minima.
11
Example: Exponential maxima

If F is the standard exponential distribution, then
1 x
e
n
exp{ exp(x)}.
CDF
0.0
0.0
0.2
0.2
0.4
0.4
CDF
0.6
0.6
0.8
0.8
1.0
1.0
F (x + log n)n = (1 exlog n )n =
6
x
10
12
2
x
Distributions of maxima and renormalised maxima of n = 1, 7, 30, 365, 3650 standard exponential variables (from left to right), with Gumbel distribution (heavy).
Example: Normal maxima

Maxima of standard normal variables also converge to a Gumbel limit, with
bn = (2 log n)0.5 0.5(2 log n)0.5 (log log n + log 4),
an = (2 log n)0.5 ,
1.0
0.8
0.6
0.0
0.2
0.4
CDF
0.6
0.4
0.0
0.2
CDF
0.8
1.0
but convergence is extremely slow.
-4
-2
-4
-2
Distributions of maxima and renormalised maxima of n = 1, 7, 30, 365, 3650 standard normal variables (from left to right), with Gumbel distribution (heavy).
12
Using the limit law

We assume that for some a > 0 and b,

Pr{(Mn b)/a x} G(x),
or equivalently,
Pr{Mn x} G{(x b)/a} = G (x),
where G is of the same type as G.

That is, the family of extreme value distributions may be fitted directly to a series of observations
of Mn .
However, it is inconvenient to have to work with three possible limiting families.
Generalized extreme value distribution

This family encompasses all three of the previous extreme value limit families:
(
)

x 1/
G(x) = exp 1 +
,
+
defined on {x : 1 + (x )/ > 0}.
From now on let x+ = max(x, 0).
and are location and scale parameters
is a shape parameter determining the rate of tail decay, with
> 0 giving the heavy-tailed (Frechet) case
= 0 giving the light-tailed (Gumbel) case
< 0 giving the short-tailed (negative Weibull) case
13
Quantiles and return levels

where G(xp ) = 1 p.
In extreme value terminology, xp is the return level associated with the return period 1/p.
15
In terms of quantiles, take 0 < p < 1 and define

i
h
xp =
1 { log(1 p)} ,
Quantile
10
Shape=0.2
Shape=0
Shape=-0.2
-2
Log y
Max-stability
Some insight into these results is obtained using the concept of max-stability.
Definition 3 A distribution G is said to be max-stable if
Gk (ak x + bk ) = G(x),
k = 1, 2, . . . ,
for some constants ak and bk .

In other words, taking powers of G results only in a change of location and scale.
The connection with extremes is that a distribution is max-stable if and only if it is a GEV
distribution.
14
Outline proof of GEV as limit law

Suppose that (Mn bn )/an has limit distribution G. Then, for large n,
Pr{(Mn bn )/an x} G(x)
and so for any k,
Pr{(Mnk bnk )/ank x} G(x).
But
Pr{(Mnk bnk )/ank x} = [Pr{(Mn bnk )/ank x}]k ,
giving two expressions for the distribution of Mn :

n
nk
Pr(Mn x) G xb
, Pr(Mn x) G1/k xb
,
an
ank
so that G and G1/k are identical apart from scaling coefficients. Thus, G is max-stable and therefore GEV.
Domains of attraction
For a given distribution function F , is it easy to determine suitable sequences an and bn and to know what limit
G will occur?
For sufficiently smooth distributions, defining the reciprocal hazard function
r(x) =
1 F (x)
.
f (x)
and letting
bn = F 1 (1 n1 ), an = r(bn ), = lim r (x)
x
the limit distribution of (Mn bn )/an is
1/
exp{(1 + x)+
} if 6= 0
and
exp(ex )
if = 0.
15
Convergence and approximation

There has been a good deal of work on the speed of convergence of Mn to the limiting regime, which
depends on the underlying distribution F for example, convergence is slow for maxima of n Gaussian
variables.
From a statistical viewpoint, this is not so useful: we use the GEV as an approximate distribution for
sample maxima for finite (small?) n, so the key question is whether the GEV fits the available dataassess
this empirically.
Direct use of the GEV rather than the three types separately allows for flexible modelling, and ducks the
question of which type is most appropriatethe data decide.
Testing for fit of one type or another is usually unhelpful, because setting (say) = 0 can give
unrealistically precise inferences. Often uncertainty in extremes is (appropriately) large, and it can be
misleading to constrain inferences artificially.
Minima
All the ideas apply equally to minima, because
min(X1 , . . . , Xn ) = max(X1 , . . . , Xn ).
Our general discussion is for maxima, and we make this transformation without comment when we
model minima.
Inference
Given observed annual maxima X1 , . . . , Xk , aim now is to make inferences on the GEV parameters
(, , ) . Possibilities include:
graphical techniqueshistorically important, remain useful for model-checking;
moment-based estimatorsusually inefficient for extremes, as moments may not exist;
probability-weighted momentswidely used in hydrology, but difficult to extend to complex

data;
likelihood-based techniqueswidely used in statistics because
intuitive paradigm often readily adapted to complex data;
have unifying general approximate estimation and testing theory;
incorporation of prior information via Bayes theorem also uses likelihood as key ingredient.
16
Likelihood
Definition 4 Let y be a data set, assumed to be the realisation of a random variable Y f (y; ), where is
unknown. Then the likelihood and log likelihood are
L() = L(; y) = fY (y; ),
() = log L(),
b (), for all .

The maximum likelihood estimate (MLE) b satisfies ()
Often b is unique and in many cases it satisfies the score (or likelihood) equation
()
= 0,
which is interpreted as a p 1 vector equation if is a p 1 vector.

The observed information defined as
2 ()
J() =
T
is a p p matrix if has dimension p.
b ()} 0.
The likelihood ratio statistic (Wilks statistic) is W () = 2{()
Likelihood approximations
For large n, and if the data were generated from f (y; 0 , then

b 1 ,
b Np 0 , J()
b 1 .
so a standard error for br is the square root of the rth diagonal element of J()
b we just have to maximise () and to obtain the Hessian matrix at the
To obtain b and J(),
maximumpurely numerically, if a routine to compute () is available;
W (0 ) 2p .
We base tests and/or confidence intervals on these results, even when the sample is small (e.g. n = 20 or
less). Often the approximations are adequate for practical work.
For details, see for example Chapter 4 of Davison (2003) Statistical Models, CUP.
17
Interest and nuisance parameters

In practice usually divides into
interest parameters q1 central to the problem (often q = 1 in practice);
nuisance parameters pq1 whose values are not of real importance.
b denote the maximum likelihood estimator of when is fixed:
Let
b ) (, ),
(,
and define the (generalised) likelihood ratio statistic

n
o
n
o
b )
b (,
b ) = 2 ()
b (b ) .
Wp () = 2 (,
If 0 is the value of that generated the data from a regular model,
Wp () 2q ,
for large n.
We often base confidence intervals and tests for 0 on this, particularly if the profile log likelihood for ,
b ) is asymmetricgenerally the case for quantiles, Value-At-Risk, and similar quantities.
p () = (b ) = (,
Non-regular models
With extremal models there is a potential difficulty the endpoint of the distribution (if finite) is a function
of the parameters, so usual asymptotic results may not hold.
Smith (1985, Biometrika) established that the limiting behaviour of the MLE depends on the value of shape
parameter :
when > 0.5, maximum likelihood estimators obey standard theory above;

when 1 < < 1/2, the MLE satisfies the score equation;
when < 1, the MLE does not satisfy the score equation.
When < 1/2, the MLE for the endpoint converges to the endpoint faster than when > 1/2 (good)
at a convergence rate that depends on (bad), and other parameters converge at the usual rate (OK), so
there is no simple theory.
In most environmental problems 1 < < 1 (often 0) so maximum likelihood works fine.
If not, Bayesian methods (which do not depend on these regularity conditions) may be preferable.
18
Modelling with the GEV

Specification (programming) of log-likelihood function:

k n
X

log (1 + 1/) log 1 +
(, , ) =
i=1

1+
o

xi 1/
xi
note this equals if any 1 + (xi )/ < 0.

Numerical maximization of log-likelihood.
Calculation of standard errors from inverse of observed information matrix (also obtained numerically).
Diagnostic checks: probability plots, quantile plots, return level plots.
Comparison of competing nested models through deviance (likelihood ratio statistic), and of non-nested
b or other similar criteria.
models by minimising the Akaike information criterion AIC = 2{dim() },
Calculation of confidence intervals for return levels.
4.2
4.0
3.6
3.8
Sea-Level (metres)
4.4
4.6
Port Pirie Annual Maxima data
1930
1940
1950
1960
1970
1980
Year
portpirie.fit<- gev.fit(portpirie$SeaLevel)
$conv
[1] 0
$nllh
[1] -4.339058
$mle
[1] 3.87474692 0.19804120 -0.05008773
$se
[1] 0.02793211 0.02024610 0.09825633
19
Port Pirie data: Diagnostics

gev.diag(portpirie.fit)
Quantile Plot
4.4
4.2
Empirical
3.8
4.0
0.6
0.4
0.0
3.6
0.2
Model
0.8
4.6
1.0
Probability Plot
0.2
0.4
0.6
0.8
1.0
3.6
3.8
4.0
4.2
Empirical
Model
Return Level Plot
Density Plot
4.4
4.6
0.0
0.5
1.0
f(z)
4.5
4.0
Return Level
1.5
5.0
0.0
0.1
1.0
10.0
100.0
1000.0
3.6
3.8
4.0
Return Period
4.2
4.4
4.6
Port Pirie data: Use of profile likelihood
2
1
0
Profile Log-likelihood
Profile log-likelihood for :
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
Shape Parameter
2
0
-2
Profile Log-likelihood
Profile log-likelihood for 100-year return level:
4.5
5.0
5.5
6.0
Return Level
20
Bayesian Extremes
Markov chain Monte Carlo (MCMC), and other stochastic computation algorithms, have enabled
Bayesian techniques to be applied to extreme value problems.
Advantages include
use of additional information via prior specification
no reliance on n asymptotics (except for model choice!)

ease of inference (for example, parameter transformations)
development of predictive inference through unified treatment of variation and uncertainty
Bayesian inference

Key idea: everything is treated as random variable, so probability calculus is applied to unknown parameters
and potential data
Use Bayes theorem to compute
Pr( unknowns | data ) =
Pr( data | unknowns )Pr( unknowns )

Pr( data )
If the unknown is a continuous parameter , then compute

Pr( | data ) = R
Pr( data | )()

,
Pr( data | )() d
where the prior density () summarises our prior knowledge/belief about

Main problem is to compute integrals like the one in the denominator, for realistic models
Often feasible using Markov chain Monte Carlo (MCMC) simulation
MCMC
Idea is that when direct simulation from a density f is difficult, the problem can be tackled by
setting up a Markov chain whose limit density is f .
Consequently, simulation of x1 , x2 , . . . from the chain yields a series with the property that the
marginal density of xj for large enough j is approximately f .
In other words, for large enough N , xN , xN +1 , . . . can be regarded as a dependent series with
marginal density f . Hence, for example, empirical moments of this series yield approximations of
the moments of f .
21
MetropolisHastings
To generate a Markov chain {xt } with limit density f :
1. Set t = 0 and choose x(0) .
2. Simulate x with arbitrary transition density h( | x(t) ).
3. Calculate
f (x )q(x(t) | x )
= (x(t) , x ) = min 1,
f (x(t) )q(x | x(t) )
4. Define
(t+1)
x
x(t)
with probability
with probability 1 .
5. Set t = t + 1 and go to step 2.

Comments on MetropolisHastings
The algorithm remains valid when f is only proportional to a target density function. This is why
the algorithm is so important in Bayesian applications.
Subject to regularity conditionsin particular, the possibility of moving everywhere in the

domainthe choice of q is arbitrary. Simple families such as random walks are generally chosen,
though poor choices will lead to poor algorithms.
A successful algorithm will:
converge quickly: density of xt is near f for small t;
mix well: have low autocorrelation.
These conditions facilitate the use of fairly short series of simulated data for inference, but use of
convergence diagnostics is essential, as there is usually no theoretical guarantee of convergence
22
Port Pirie: MCMC analysis
0.6
scale
0.2
0.4
4.6
4.2
3.8
location
5.0
0.8
MCMC chains for GEV parameters and (by transformation) 100-year return level in analysis of Port Pirie annual
maxima. Analysis based on vague, though proper, priors.
1000
3000
5000
1000
1000
3000
5000
6.5
6.0
5.5
5.0
4.5
0.2
shape
0.2
0.6
3000
Index
100year return level
Index
5000
Index
1000
3000
5000
Index

Posterior means:
b = 3.87,
b = 0.208, b = 0.045,
Posterior standard deviations:
SD() = 0.029, SD() = 0.022, SD() = 0.099

23
3.85
3.95
20
5 10
4.05
0.15
0.20
0.25
0.30
Shape
100year return level
0.2
0.4
1.0
0.0
6
5
4
3
2
1
0.0
2.0
scale
Probability density function
location
0.4
20
15
10
5
3.75
Scale
Location
4.0 4.5 5.0 5.5 6.0 6.5 7.0
shape
return level
Posterior densities in analysis of Port Pirie annual maxima.

Limitations of the GEV limit law

The GEV limit law for block maxima requires careful reading.
It states that when (normalized) maxima have a limit, that limit will be a member of the GEV
family. It does not (by itself) guarantee the existence of a limit, and there exist wide classes of
models for which no limit exists.
One interesting case is the Poisson distribution. If {Xi } is a sequence of Poisson variables with
mean , a sequence of constants {In } can be found such that

lim Pr max = In or In + 1 = 1
n
1in
and this degeneracy implies that no limit distribution for normalized maxima exists.
The discreteness in the Poisson distribution causes the oscillation between In and In + 1. It is not
the cause of the limit degeneracy, which is actually a consequence of the Poisson tail decay.
24
Point Process Approach
slide 51
Improved Inferences
The annual maxima method can be inefficient if other data are available. Alternative methods include:
peaks over thresholds,
r-largest order statistics.
Both are special cases of a point process representation.

Hourly rainfall (mm)

5
10
15
Example: Eskdalemuir rainfall
1970
1975
1980
1985
Time

5
10
15
1970
1975
1980
1985
Time
25

5
10
15
1970
1975
1980
1985
Time
Point process
A point process P is simply a collection of pointstimes of avalanches, positions of stars in the

sky, time/position of earthquake times/epicentres; . . .
For any suitable set A, we simply count the number of points in A, and for some (random) n we
can write the process as
n
X
Xj
P=
j=1
where the Xj are the positions of the points, and x puts unit mass at x.
The basic point process is the Poisson process.
Poisson process
Definition 5 Let X Rd , and let a function (A) 0 be defined for any measurable A X . A
Poisson process P on X with intensity measure satisfies
the number of points of P in A, denoted N (A), has the Poisson distribution with mean (A);
If A, B X are disjoint, then N (A) and N (B) are independent.
If A = [a1 , x1 ] [ad , xd ], and if
(x1 , . . . , xd ) =
d (A)
x1 xd
exists, then is called the intensity (density) function of P.

26
Point process limit: Basic idea

iid
Suppose F unknown, and take X1 , . . . , Xn F .
Form a 2-dimensional point process {(i, Xi ); i = 1, . . . , n} and characterize the behaviour of this
process in regions of the form A = [t1 , t2 ] [u, ).
More formally, suppose (Mn bn )/an converges to the distribution
o
n
1/
.
G(x) = exp (1 + x)+
Construct a sequence of point processes on R2 by

i
Xi bn
Pn =
,
: i = 1, . . . , n .
n+1
an
Then Pn P as n , where P is a Poisson process.
Poisson limit
Poisson limit when rescaling samples of sizes 10, 100, 1000, 10,000.
0.0
0.2
0.4
0.6
0.8
1.0
0.0
0.2
0.4
0.6
0.8
1.0
0.0
0.2
0.4
0.6
t
0.8
1.0
-2
(X-b)/a
0.0 0.2 0.4 0.6 0.8 1.0
-4
-6
-8
(X-b)/a
-8
-6
-4
-8
-8
-6
-6
(X-b)/a
-2
-4
-4
(X-b)/a
-2
-2
Limiting Poisson process

As n, on regions bounded away from , Pn P, a Poisson process defined by its intensity

measure .
Consider the set Ax = [0, 1] [x, ), for some x > u.
The Poisson property gives
Pr{no points in Ax } = exp{(Ax )}
= Pr{Mn x}
o
n
1/
,
exp (1 + x)+
and so, by time-homogeneity of the process,
1/
{(t1 , t2 ) [x, )} = (t2 t1 )(1 + x)+

.
27
Statistical application
For statistical application, it is convenient to:
Assume the limiting process is a reasonable approximation for finite n above a high threshold, u.
To absorb the unknown scaling coefficients into the intensity function and so work directly with
the original series.
To rescale the intensity so that the annual maximum has the GEV distribution with parameters
(, , ) .
This leads to modelling the series {(i, Xi ); i = 1, . . . , n} as a Poisson process above u with intensity
function
1/
{(t1 , t2 ) (x, )} = ny (t2 t1 ){1 + (x )/}+
where ny is the number of years of observation, and the time limits are rescaled to 0 t1 < t2 1.
Likelihood

Maximum likelihood inference is most natural.

For a region of the form Av = [0, 1] (v, ) for v > u, the likelihood is
NAv
L(Av ; , , )
= exp{(Av )}
d(ti , xi )
i=1
NAv
n
1/ o Y
1/1
1
= exp ny 1 + v
,
1 + xi +
i=1
where x1 , . . . , xNAv is an enumeration of the NAv points that exceed the threshold v.
The parameters are the same as for the maximum model.

5
10
15
1970
1975
1980
1985
Time
Model is now applied to a time series of hourly rainfall aggregates measured in mm with a threshold
of u = 5mm.
28

(rain.fit <- fpot(esk.rain,threshold=5,model="pp",
start=list(loc=10,scale=1.2,shape=0.1),npp=365.25*24))
Threshold: 5
Number Above: 356
Proportion Above: 0.0024
Estimates
loc
10.13628
scale
1.86637
Standard Errors
loc
scale
0.35380 0.23673
shape
0.06696
shape
0.05379

Quantile Plot
0.0
0.2
10
Empirical
15
Model
0.4
0.6
0.8
20
1.0
Probability Plot
0.0
0.2
0.4
0.6
Empirical
0.8
1.0
10 12
Model
14
16
18
Return Level Plot
0.0
0.1
10
0.2
Density
0.3 0.4
Return Level
15
20
0.5
25
0.6
Density Plot
10 12
Quantile
14
16
0.05
0.20
1.00
5.00
Return Period
20.00
29
Threshold methods
Let Xn,i
= (Xi bn )/an , for i = 1, . . . , n. Then, by the Poisson limit,
{(0, 1) (u + x, )}
{(0, 1) (u, )}
1/

x
.
=
1+
+ (u ) +
Absorbing the unknown scaling coefficients leads to the survivor function of the Generalized Pareto
Distribution (GPD):
Pr{Xn,i
> u + x | Xn,i
> u}

x 1/
Pr{Xn,i > u + x | Xn,i > u} = 1 +
,
+
x > 0,
where = + (u ).
Taking the limit 0 gives the exponential distribution as a special case.
Alternative inference
An equivalent inference to the point process method is to apply the GPD model to the exceedances of
a threshold u. For the rainfall data we obtain:
(rain.gpdfit <- fpot(esk.rain,threshold=5,npp=365*24))
Deviance: 1058.954
Threshold: 5
Number Above: 356
Estimates
scale
shape
1.52239 0.06702
Standard Errors
scale
shape
0.11488 0.05383
30
Interpretation
There are now just two parameters, since the model conditions on the exceedance (one parameter
is lost corresponding to the crossing rate of u).
The estimate of is (almost!) identical to the point process analysis, while the change of
parameterization leads to a different value of .
Provided < 1, the mean residual life exists and satisfies

E(X u | X > u) =
+ u
,
1
we obtain a simple diagnostic for threshold selection. The mean exceedance above u should be
linear in u at levels for which the model is valid.
Suggests looking for linearity in a plot of the empirical mean residual life.
Mean residual life plot

mrlplot(esk.rain) gives
0.0
0.5
1.0
Mean Excess
1.5
2.0
2.5
3.0
3.5
Mean Residual Life Plot
6
8
Threshold
10
12
Interpretation hard, but u > 2 looks reasonable; u = 5 looks high.

Threshold selection
0.2
14
Scale
3
4
Location
16 18 20
Shape
0.0 0.1 0.2 0.3
22
Bias-variance trade-off: threshold too lowbias because of the model asymptotics being invalid; threshold too
highvariance is large due to few data points.
An alternative approach is to fit the Poisson process model at many thresholds and look for parameter stability:
3 4 5
Threshold
3 4 5
Threshold
3 4 5
Threshold
Again, u = 5 looks too high.
31
rlargest order statistics method

Consider the vector of r largest order statistics in a block (say, year) of data:
!
(1)
(2)
(r)
Mn bn Mn bn
Mn bn
,
,...,
an
an
an
(1)
rescaled in the same way as just the maximum, Mn .

(r)
Setting u = Mn in the point process likelihood gives
!1/ r
(r)
Y 1
Mn
L = exp 1 +
i=1
(i)
Mn
1+
!1/1
This is the likelihood contribution for a single block (year). The full likelihood is obtained by
multiplying such terms across the blocks.
Venice Sea Levels

rlarg.fit(venice.data)
nllh:
[1] 1149.268
mle:
[1] 120.3961096
12.6929941
-0.1148273
se:
[1] 1.34704941 0.52516203 0.01901015
32
Modelling Issues
slide 73
Modelling issues
Extreme value data usually show:
dependence on covariate effects;
short term dependence (storms for example);
seasonality (due to annual cycles in meteorology);
longterm trends (due to gradual climatic change);
other forms of nonstationarity (for example, the deterministic effect of tides on sealevels).
For temporal dependence there is a sufficiently wide-ranging theory which can be invoked. Other
aspects have to be handled at the modelling stage.
We now discuss how to deal with
short-term dependence;
trends and seasonality.
D(un ) condition
The usual (weak) condition which is adopted to eliminate the effect of long-range dependence is
Leadbetters D(un ) condition:
For all i1 < . . . < ip < j1 < . . . < jq with j1 ip > l
|Pr{Xi1 un , . . . , Xip un , Xj1 un , . . . , Xjq un }
Pr{Xi1 un , . . . , Xip un }Pr{Xj1 un , . . . , Xjq un }| (n, l),
where (n, ln )0 for some sequence ln = o(n). This implies that rare events that are sufficiently
separated are independent.
Theorem 6 If D(un ) is satisfied with un = an x + bn , and if
Pr{Mn an x + bn }G(x),
then G is a GEV distribution.
Conclusion: Same models apply for processes with (restricted) long-range dependence.
33
Short-term dependence: Example

iid
x
3
Suppose Y1 , Y2 , . . . exp(1), and Xi = max(Yi , Yi+1 ):
20
40
60
80
100
Extremes tend to cluster in pairs.

Exponential example
Marginal distribution:
Pr{Xi < x}
Pr{Yi < x, Yi+1 < x} = (1 ex )2 .
Let X1 , X2 , . . . be an independent series with the same marginal distribution, and Mn = max{X1 , . . . , Xn }.
Then

1 x 2n
e
Pr{Mn log(2n) < x} = [1 exp{x log(2n)}]2n = 1 2n

exp ex = G2 (x),
while, for Mn = max{X1 , . . . , Xn },
Pr{Mn log(2n) < x}
and G1 (x) = {G2 (x)}1/2 .
Pr{Y1 < x + log(2n), . . . , Yn+1 < x + log(2n)}

n+1
x
=
1 e2n

exp 21 ex = G1 (x),
34
Example: Moving maxima

iid
Let Y0 , Y1 , Y2 , . . . F , with
n
o
1
F (y) = exp (a+1)y
,
y > 0,
where 0 a 1 is a parameter, and define the process Xi by
Xi = max{aYi1 , Yi },
5.0
50.0
i = 1, . . . , n.
0.1
0.5
x(i)
5.0
0.1
0.5
x(i)
50.0
X0 = Y0 ,
10
20
30
40
50
10
20
40
50
30
40
50
50.0
5.0
0.1
0.5
x(i)
5.0
0.1
0.5
x(i)
30
i
50.0
10
20
30
40
50
10
20
Moving maxima: Asymptotic properties

Pr{Xi x} = Pr{aYi1 x, Yi x} = exp(1/x),
Now, let X1 , X2 , . . . be a series of independent variables having a marginal standard Frechet distribution, and
define Mn = max{X1 , . . . , Xn }. Then,
n
Pr{Mn nz} = [exp{1/(nz)}] = exp(1/z).

On the other hand, for Mn = max{X1 , . . . , Xn },
Pr{Mn nz} =
=
=
Pr{X1 nz, . . . , Xn nz}

Pr{Y1 nz, . . . , Yn nz}
h
n
oin
1
exp (a+1)nz
1
{exp (1/z)} a+1 ,
It follows that
Pr{Mn nz} = [Pr{Mn nz}] a+1
35
Extremal index
The previous examples illustrate the following general result.
Theorem 7 Let {Xi } be a stationary process and {Xi } be independent variables with the same marginal
distribution. Set Mn = max{X1 , . . . , Xn } and Mn = max{X1 , . . . , Xn }. Under suitable regularity conditions,
Pr {(Mn bn )/an z} G1 (z)
as n for normalizing sequences {an > 0} and {bn }, where G1 is a non-degenerate distribution function, if
and only if
Pr {(Mn bn )/an z} G2 (z),
where
G2 (z) = G1 (z)
for a constant called the extremal index that satisfies 0 < 1.
Thus if G1 is GEV, then so is G2 , with the same a strong robustness result.
Extremal index
The extremal index can also be defined as

= lim Pr{max(X2 , . . . , Xpn ) un | X1 un },
n
where pn = o(n), and the sequence un is such that Pr{Mn un } converges.
Loosely, is the probability that a high threshold exceedance is the final element in a cluster of
exceedances.
Thus extremes occur in clusters whose (limiting) mean cluster size is 1/.
The mean distance between clusters is increased by a factor 1/.
In fact the distribution of a cluster maximum is the same as the marginal distribution of an
exceedance, so there is no bias in considering only cluster maxima, if we can identify clusters . . .
36
Consequences
When clustering occurs, the notion of return level is more complex:

if = 1, then the 100-year-event has probability 0.368 of not appearing in the next 100 years;
if = 1/10, then on average the event also occurs ten times in a millenium, but all together: it has
probability 0.904 of not appearing in the next 100 years.
If we can estimate the tail of marginal distribution F (e.g. by fitting to block maxima), then
Pr(Mn x) F (x)n G(x),
where G is GEV with parameters , , . The marginal quantiles are approximately
F 1 (p) G1 (pn ) > G1 (pn ),
so may be much larger than would be the case with = 1.
A similar argument shows that ignoring can lead to over-estimating a return level estimated using G.
D (un ) condition
The D (un ) condition is said to hold for the process {Xi } if

[n/k]
lim sup n
n
X
j=2
P {X1 > un , Xj > un } 0 as k
If a stationary process satisfies both the D(un ) and D (un ) conditions, then its extremal index is
= 1.
D (un ) holds for many well-known processes, for example Gaussian autoregressive processes. This
raises the issue of how best to model the extremes of such processes, since at any realistic level,
dependence is likely to be strong, while the asymptotic limit is independence.
Other conditions D , D (2) , . . . facilitate extremal index calculation in special cases.
Modelling techniques
The above discussion tells us that under the weak condition D(un ) and some mild additional
conditions, the maxima of stationary series can be modelling using the GEV, and that exceedances
can be modelling using the GPD. This is a strong robustness result, but it implies that extremes will
occur in clusters of correlated observations.
Possible modelling strategies using exceedances and the GPD are:
to identify clusters and model cluster maxima only;
as above, but also estimate the extremal index empirically;
to ignore the dependence on the basis that the marginal model is valid, but to inflate standard
errors to account for reduction in independent information;
to specify explicit model for dependence, such as a first-order Markov chain.
37
Example: Wooster temperatures

3
10
-30
-20
-10
Degrees Below 0 F.
10
0
-10
-30
-20
Degrees Below 0 F.
20
20
10
20
30
40
Day Index
10
20
30
40
Day Index
Simple estimates of the extremal index are based on empirical means of clusters. Here the runs method is used:
a cluster is deemed to have terminated when there are r consecutive observations below the threshold. Left:
r = 1 gives 4 clusters. Right: r = 3 gives 2 clusters.
Calculation of return levels

The m-observation return level is

xm = u +
i
(mu ) 1 ,
where and are the parameters of the threshold excess generalized Pareto distribution, u is the
probability of an exceedance of u, and is the extremal index.
nu
nc
bu =
and b =
.
n
nu
where nc is number of clusters and nu is number of exceedances.

So simply estimate the component u by nc /n.
Example: Wooster temperatures
nc
b
b
x
b100
b
u = 10
r=2
r=4
31
20
11.8 (3.0)
14.2 (5.2)
0.29 (0.19) 0.38 (0.30)
27.7 (12.0)
26.6 (14.4)
0.42
0.27
u = 20
r=2
r=4
43
29
17.4 (3.6)
19.0 (4.9)
0.36 (0.15) 0.41 (0.19)
26.2 (9.3)
25.7 (9.9)
0.24
0.16
Results may be sensitive to choice of threshold, u, and run length, r.

38

(rain.fit <- fpot(esk.rain,threshold=5,model="pp",
Threshold: 5
Number Above: 356
Estimates
loc
10.13628
scale
1.86637
Standard Errors
loc
scale
0.35380 0.23673
shape
0.06696
shape
0.05379

(rain.fit <- fpot(esk.rain,threshold=5,model="pp",cmax=T, r=0,
Threshold: 5
Number Above: 356
Clustering Interval: 0
Number of Clusters: 272
Extremal Index: 0.764
Estimates
loc
scale
9.81557 1.83937
shape
0.04178
Standard Errors
loc
scale
shape
0.3519 0.2406 0.0632
39
0.2
0.3
0.4
Extremal Index
0.5
0.6
0.7
0.8
For finite threshold u, increases with u, suggesting that very extreme hourly rainfall totals occur
singly.
3
4
Threshold
Non-stationarity
General results not broad enough for application hence, model trends, seasonality and covariate
effects by parametric or nonparametric models for the usual extreme value model parameters.
Some possibilities for parametric modelling:
(t) = + t;
(t) = exp( + t);

1 , t t0 ,
(t) =
2 , t > t0 ;
(t) = + y(t).
Parameter estimation
Model specification (example)

Zt GEV((t), (t), (t)),
Likelihood (for complete parameter set ,

L() =
m
Y
g(zt ; (t), (t), (t)),
t=1
where g is GEV model density.

Maximization of L yields maximum likelihood estimates.
Standard likelihood techniques also yield standard errors, confidence intervals etc.
40
Model reduction
For nested models M0 M1 , the deviance statistic is

D = 2{1 (M1 ) 0 (M0 )},
Based on asymptotic likelihood theory, M0 is rejected by a test at the -level of significance if

D > c , where c is the (1 ) quantile of the 2k distribution, and k is the difference in the
dimensionality of M1 and M0 .
Model diagnostics
Assuming a fitted model

the standardized variables
b
Zt GEV(b
(t),
b(t), (t)),

Zt
b(t)
1
b
log 1 + (t)
,
Zt =
b
b(t)
(t)
each have the standard Gumbel distribution, with probability distribution function
Pr{Zt z} = exp(ez ),

z R.
Possible diagnostics:

probability plot: i/(m + 1), exp( exp(
z(i) )); i = 1, . . . , m

quantile plot: log [ log{i/(m + 1)}] , z(i) ; i = 1, . . . , m
Other extreme value models

Similar techniques are applicable for the threshold exceedance and point process models, but
threshold selection is likely to be a more sensitive issue.
Time-varying thresholds may also be appropriate, though there is little guidance on how to make
such a choice.
Example: Fremantle sea levels

Model
Constant
Linear in
Quadratic in
Linear in and

Log-likelihood
43.6
49.9
50.6
50.7
Based on likelihood considerations, best model is linear in .

For this model, trend is around 2mm per year and b = 0.125 (0.070).
(Note: Model improves further by inclusion of SOI as a covariate for ).
41
1.6
1.2
1.4
Sea-level (metres)
1.8
1900
1920
1940
1960
1980
Year
Fitted trend in location parameter for Fremantle annual maximum sea levels.
Residual Quantile Plot (Gumbel Scale)
0.0
0.2
0.4
Model
Empirical
0.6
0.8
1.0
Residual Probability Plot
0.0
0.2
0.4
0.6
0.8
1.0
-1
Empirical
Model
Probability and quantile plots for nonstationary GEV analysis of Fremantle annual maximum sea levels.
Example: Race times

Model
Constant
Log-likelihood
54.5
Linear
51.8
Quadratic
48.4
239.3
(0.9)
(242.9, 0.311)
(1.4, 0.101)
(247.0, 1.395, 0.049)
(2.3, 0.420, 0.018)
b
3.63
(0.64)
2.72
(0.49)
2.28
(0.45)
b
0.469
(0.141)
0.201
(0.172)
0.182
(0.232)
Quadratic model apparently preferable.

42
240
238
232
234
236
Race Time (secs.)
242
244
246
Example: Race times
1975
1980
1985
1990
Year
Fitted models for location parameter in womens 1500 metre race times. Note quadratic model would
lead to slower races in recent and future events.
Example: Race times

Alternative exponential model
(t) = 0 + 1 e2 t .
240
238
232
234
236
Race Time (secs.)
242
244
246
has log-likelihood 49.5. Not so good as quadratic model, though comparison via likelihood ratio test
is invalid as models are not nested. Better behaviour for large t suggests a preferable model though.
1975
1980
1985
1990
Year
43
Example: Wooster Temperature Series

Spring
-20
-60
-40
Degrees Below Zero F.
0
-20
-40
20
Winter
100
200
300
400
100
200
Day Index
Day Index
Summer
Autumn
300
400
300
400
-30
-70
-50
-50
-60
-70
-40
-10
100
200
300
400
Day Index
100
200
Day Index
One approach to handle seasonality is to model seasons separately. This is not likely to be sufficient
here, at least with only 4 seasons.
0
-20
-40
-60
Daily Minimum Temperature (Degrees Below 0 F.)
20
1983
1984
1985
1986
1987
1988
Year
Selection of a time-varying threshold for negated Wooster temperature series.


Model
1. Time-homogeneous
2. As 1. but periodic in
3. As 2. but periodic in log
4. As 3. but periodic in
5. As 3. plus linear trend in and log
6. As 3. with separate for each season
p
3
5
7
9
9
10
143.6
126.7
143.6
145.9
145.1
143.9
Likelihood considerations lead to Model 3 as preferable.

44
Semiparametric regression
We may relax parametric assumptions, or mix them with more flexible forms. For example, we may want to
model temperatures at sites in the Alps as dependent on altitude a(x), where x is location, plus a smooth
function of time t, giving
(x, t) = 0 + 1 a(x) + g(t), or (x, t) = 0 + 1 a(x) + g{t, a(x)}.
Formulation
A standard approach is then to include basis functions in the model, so

0 + 1 a(x) + g(t) 0 + 1 a(x) + 1 b1 (t) + + p bp (t),
where the functions b1 (t), . . . , bp (t) may be splines, polynomials, etc., depending on the properties sought.
Often take splines, which have optimality properties, and which correspond to prediction of stochastic
processes.
Usually penalise the smoothing parameters = (1 , . . . , p )T , for example, maximising a log likelihood of
form
(, ) + T K,
where smoothing parameter > 0 controls smoothness of result (equivalent to effective degrees of
freedom).
Interpretation in terms of mixed model, by representing Np (0, K 1 1

), allows data to choose degree
of smoothing.
45
Example: Swiss winter temperatures

1970
Grachen
1980
1990
Sils Maria
Arosa
Temperature below threshold (degrees Celsius)
5
10
15
20
0
Chateau dOex
La Brevine
Guttannen
Oberiberg
Chaumont
Andermatt
Fribourg
Haidenhaus
Heiden
Einsredeln
Vattis
Elm
5
10
15
20
0
5
10
15
20
0
Rheinfelden
Grono
Altstatten
Thun
Ebnat Kappel
Meiringen
5
10
15
20
1970
1980
1990
1970
1980
1990
1970
1980
1990
Year
DecemberFebruary temperatures ( C) below thresholds at 21 Swiss weather stations, for winters

197071 to 199798.
0.4
0.3
0.2
lambda
0.0
0.1
0.2
0.0
0.1
lambda
0.3
0.4
Swiss winter temperatures
20
40
60
80
8
6
2
sigma
6
sigma
4
2
20
40
60
80
0.10
xi
0.20
0.25
0.25
0.20
0.15
0.15
0.10
0.05
North Atlantic oscillation index
0.05
Day
xi
Day
500
1000
1500
Altitude
46
Swiss winter temperatures

Estimated 0.05 quantiles for winter temperatures at Rheinfelden (298m), Vattis (957m), and Arosa
(1821m), as a function of the North Atlantic oscillation index
5
30
30
30
15
20
25
10
Temperature (degrees Celsius)
25
25
10
15
20
20
15
10
Arosa
Vattis
Rheinfelden
Issues with smoothing extremes

Care needed with choice of model: with GPD, change of threshold u 7 u changes scale
parameter:
u 7 u = u + (u u),
so, for example, the formulation
(u , ) = (exp{g(t)}, h(x))
at threshold u will become

(u , ) = exp{g(t)} + h(x)(u u ), h(x) ,
at threshold u , so interpretation depends on thresholdshould avoid.

Better to fit on GEV scale, or using point process formulation, for which parametrization is
invariant.
47
Multivariate Extremes
slide 111
Multivariate extremes
Lack of data means the precision of extreme value estimates is often poor.
The only way to overcome this is to incorporate additional information, suggesting the use of
multivariate models.
Questions include:
What issues are important when contemplating multivariate extremes?
What are appropriate ways to summarize dependence in extremes?
What models are suggested by asymptotic theory?
How should inference be carried out?
Componentwise maxima
iid
If (X1 , Y1 ), (X2 , Y2 ) F (x, y), define

Mx,n = max {Xi }
i=1,...,n
and
My,n = max {Yi },

i=1,...,n
then
M n = (Mx,n , My,n )
is the vector of componentwise maxima.

The asymptotic theory of multivariate extremes begins with an analysis of M n as n .
The issue is partly resolved by recognizing that {Xi } and {Yi } considered separately are sequences
of independent, univariate random variables, to which the earlier theory may be applied.
Marginal standardization
Representations are especially simple if we assume that both Xi and Yi have the standard Frechet
distribution, with distribution function
F (z) = exp(1/z),
Then defining
M n
M n
z > 0.
max {Xi }/n, max {Yi }/n
i=1,...,n
i=1,...,n
the marginal distributions of

are standard Frechet for all n. Remaining questions concern
dependence of limit distribution only.
48
Limit distribution of componentwise maxima
Let M n = (Mx,n
, My,n
) be componentwise maxima of independent vectors with standard Frechet marginal
distributions. Then if
d
Pr{Mx,n
x, My,n
y} G(x, y),
where G is a non-degenerate distribution function, G has the form

G(x, y) = exp{V (x, y)},
where
V (x, y) = 2
max
0
x > 0, y > 0
w 1w
, y
x
dH(w),
and H is a distribution function on [0, 1] satisfying the mean constraint

Z 1
wdH(w) = 1/2.
0
If H is differentiable with density h, then

V (x, y) = 2
max
0
w 1w
, y
x
h(w)dw.
Special cases
Independence: When H is a measure with masses 0.5 on w = 0 and w = 1

G(x, y) = exp{(x1 + y 1 )},
x > 0, y > 0.
Perfect dependence: When H is a measure that places unit mass on w = 0.5

G(x, y) = exp{ max(x1 , y 1 )},
x > 0, y > 0,
which is the distribution function of variables that are marginally standard Frechet, but which are
perfectly dependent: X = Y with probability 1.
Parametric models
For modelling purposes, it is usual to specify a parametric family for H or h that encompasses a
wide range of dependence types over the parametric domain.
Standard example is the logistic model, with

h(w) = 12 (1 1){w(1 w)}11/ {w1/ + (1 w)1/ }2
for 0 < < 1.
In this case
o
n
,
G(x, y) = exp x1/ + y 1/
x > 0, y > 0.
Independence and perfect dependence arise as limits as 1 and 0 respectively.
49
Alternative models
A limitation of the logistic model is its symmetry. Asymmetric alternatives include the
bilogistic model
h(w) = 12 (1 )(1 w)1 w2 (1 u)u1 {(1 u) + u}1
on 0 < w < 1, where 0 < < 1 and 0 < < 1, and u = u(w, , ) is the solution of
(1 )(1 w)(1 u) (1 )wu = 0;
and the Dirichlet model

h(w) =
( + + 1)(w)1 {(1 w)}1

,
2()(){w + (1 w)}++1
0 < w < 1,
for parameters > 0 and > 0.

Inference for multivariate extreme value models

Inference consists of the following steps:
1. estimation of marginal distributions and transformation to standard Frechet;
2. choice of the dependence model H;
3. estimation of the parameters of H by maximum likelihood;
4. model assessment.
There is a potential gain in efficiency by estimating marginal and dependence parameters in a single
likelihood maximization.
Structure variables
Though processes may be multivariate, it may be that a univariate functiona so-called

structure variableis the quantity of interest.
This suggests two possible methods of analysis:

1.
univariate extreme value analysis of the sturcture variable process; or
2.
multivariate analysis of the full process, followed by marginalization to the structure variable
of interest.
50
Inference for structure variables

Univariate inference is trivial.
For multivariate inference, if Z = (Mx , My ) is the structure variable of interest, and

M = (Mx , My ) has density g, then
Z
g(x, y)dxdy,
Pr{Z z} =
Az
where Az = {(x, y) : (x, y) z}.
Sometimes integration can be avoided. For example, if Z = max{Mx , My },

Pr{Z z} = Pr{Mx z, My z} = G(z, z),
where G is the joint distribution function of M .
4.4
4.2
4.0
3.8
3.6
Port Pirie Annual Maximum Sea-level (m)
4.6
Example: Sea levels
1.3
1.4
1.5
1.6
1.7
1.8
1.9
Freemantle Annual Maximum Sea-level (m)
Annual maximum sea levels at Port Pirie and Fremantle. Logistic

b = 0.922 (0.087), implying
near-independence.
51
2.0
1.0
1.5
Return Level (m)
2.5
3.0
Analysis of structure variable
10
50
100
500
1000
Return Period (Years)
Return levels of structure variable Z = max{Mx , (My 2.5)} using both univariate and multivariate
methods.
2.0
1.6
1.8
Return Level (m)
2.2
2.4
Impact of dependence on structure variables I
10
50
100
500
1000
Z = max{Mx , (My 2.5)} in logistic model analysis of Fremantle and Port Pirie annual maximum
sea-level series with = 0, 0.25, 0.5, 0.75, 1 ( = 0 is lowest curve).
52
1.6
1.2
1.4
Return Level (m)
1.8
2.0
Impact of dependence on structure variables II
10
50
100
500
1000
Z = min{Mx , (My 2.5)} in logistic model analysis of Fremantle and Port Pirie annual maximum
sea-level series with = 0, 0.25, 0.5, 0.75, 1 ( = 0 is highest curve).
Point process representation

As in the univariate case, there are threshold exceedance and point process characterizations of
extremes that enable a greater use of available information.
The point process representation, in particular, also provides some insight into the measure
function H that appears in the componentwise limit law.
Point process construction

(X1 , Y1 ), (X2 , Y2 ) . . . a sequence of independent variables with standard Frechet margins.
Assume componentwise maxima convergence
Pr{Mx,n
x, My,n
y} G(x, y).
Define sequence of point processes {Nn } by

Nn = {(n1 X1 , n1 Y1 ), . . . , (n1 Xn , n1 Yn )}.
Normalization by n of standard Frechet variables is required to obtain marginal convergence.

53
Point process limit

On regions bounded from the origin (0, 0), we have

d
Nn N,
where N is a non-homogeneous Poisson process on (0, ) (0, ).

Moreover, in terms of pseudo-polar coordinates
r =x+y
and w =
x
x+y ,
the intensity function of the limiting process N is

(r, w) = 2 dH(w)
r2 .
The function H is related to G by

G(x, y) = exp{2
max
w 1w
x, y
dH(w)}
Comments
The intensity function of the limit process factorizes across r and w. Loosely, the relative
magnitude of extreme events in the two variables is independent of the magnitude itself.
The limit provides an interpretation of H as the distribution of relative magnitudes of extreme

events between the two variables.
In practiceas usualthe limit process is taken to be exact for extreme enough events: in this
case for events which are sufficiently far from (0, 0).
Consistency of results
Pr{Mx,n
x, My,n
y} = Pr{Nn (A) = 0},
where
A = {(0, ) (0, )}\{(0, x) (0, y)}.
So,
Pr{Mx,n
x, My,n
y} Pr{N (A) = 0} = exp{(A)},
where
(A) =
=
= 2
2
A
1
dr
dH(w)
r2
Z
w=0
Z 1
w=0
r=min{x/w,y/(1w)}
max
w 1w
x, y
dr
dH(w)
r2
dH(w).
54
Likelihood for Poisson process model

Choosing A = {(x, y) : x/n + y/n > r0 }, for large r0 ,
(A) = 2
dr
dH(w) = 2
r2
r=r0
dr
r2
dH(w) = 2/r0 ,
w=0
which is constant with respect to the parameters of H.

Hence, assuming H has density h,
L(; (x1 , y1 ), . . . , (xn , yn )) = exp{(A)}
NA
Y
(x(i) /n, y(i) /n)
i=1
NA
Y
h(wi ),
i=1
where wi = x(i) /(x(i) + y(i) ) for the NA points (x(i) , y(i) ) falling in A.
Comments
Choice of threshold r0 is based, as usual, on empirical measures of model stability.
Alternative forms of threshold curve lead to more complicated likelihood expressions.
Simultaneous estimation of marginal and dependence features is possibly advantageous, but again
results in a considerably more complicated likelihood.
0.0
-0.02
Log-daily return
0.02
Example: Exchange rate data
1997
1998
1999
2000
2001
2000
2001
0.0
-0.02
Log-daily return
0.02
Year
1997
1998
1999
Year
Log-daily returns of exchange rates. Top panel: UK sterling/US dollar exchange rate. Bottom panel:
UK sterling/Canadian dollar exchange rate.
55
0.01
0.0
-0.01
-0.02
Sterling v. Canadian Dollars
0.02
-0.02
-0.01
0.0
0.01
0.02
Sterling v. US Dollars
Concurrent values of exchange rates.

100
10
1
Standardized Canada/UK Daily Returns
1000
10
100
1000
Standardized US/UK Daily Returns
Concurrent values of exchange rates after transformation to Frechet scale.

56
1.5
1.0
0.0
0.5
Relative Frequency
2.0
0.0
0.2
0.4
0.6
0.8
1.0
Fitted logistic model density h in point process analysis of exchange rate data. (b
= 0.434 (0.025))
0.2
-0.2
0.0
Surge (m)
0.4
0.6
0.8
Example: Oceanographic data
10
Wave Height (m)
Simultaneous values of wave and surge height.

57
1.0
0.0
0.5
Relative Frequency
1.5
2.0
0.0
0.2
0.4
0.6
0.8
1.0
Various fitted models h in point process analysis of wave-surge data.


Model
Logistic
Bilogistic
Dirichlet
227.2
230.2
238.2
0.659
0.704
0.852
0.603
0.502
Details of various fits to oceanographic data give support for asymmetric dependence structure.
Higher-dimensional models
Limit results and characterizations have analogous forms in higher dimensions.
Extremal dependence is chracterized by a dependence function H on the simplex

sd = {(w1 , . . . , wd ) : wj 0, j = 1, . . . , d,
d
X
wj = 1}
j=1
subject to
Z
wj dH(w) = 1,
j = 1, . . . , d
Sd
In principle, inference techniques remain the same, but

1.
model specification is more difficult;
2.
likelihood calculation is more difficult;
3.
reliability of asymptotic results is more questionable.
58
Asymptotic dependence
A limitation of multivariate extreme value models (and point process equivalents) is that apart from
the degenerate case of independence, all such models are asymptotically dependent; the intuition is
that because these are asymptotic (limiting) models, the extent of dependence cannot vary with the
rareness of the event, whereas this happens in practice.
Two variables X and Y with the same distribution are said to be asymptotically independent if
lim Pr{Y > z | X > z} = 0,
otherwise they are asymptotically dependent.

Loosely, two variables are asymptotically independent if an extreme value in one has zero
probability of happening on the occurrence of an extreme in the other variable.
Bivariate normal variables

The class of asymptotically independent variables is non-trivial, and includes, for example, all
bivariate normal variables with positive correlation.
Using extreme value models for such distributions is misleading.
The limit is independence, but this provides a poor approximation to dependence at finite
levels.
A fitted model at any specific threshold will overestimate strength of dependence on

exrapolation.
Much recent work has looked at inference for asymptotic independent models: Ledford and Tawn,
Heffernan, Coles and Tawn, Heffernan and Tawn.
59
Spatial Extremes
slide 143
Spatiotemporal extremes
Many environmental extremal problems are spatial or temporal in nature, or both:
heatwaves
rainfall
avalanches
forest fires
storms
sea levels
Likely to be more important in the future, prediction (on different scales) needed for long-range
planning, short-range evacuation, . . .
Geostatistics
slide 145
Geostatistics
Statistics of spatially-defined variables
Mostly a multivariate normal theory:
remove trends in mean and dispersion in space and time
transform residuals to standard normal margins
fit suitable spatial/space-time correlation functions
inferences using WLS, (likelihood), or Bayes (McMC)
More generally, set up model for response variable Y (x) with x X :

ind
Y (x) | S(x) f (y; ),
S(x) N {(x), (x)},
and use MetropolisHastings algorithm for inference on S(x), predictions of future Y , etc.
(Diggle, Tawn, Moyeed, 1998), lots of Bayesians
60
Example: Temperature data

Maximum temperature: June, July, August, 2001!2005
!
Jungfraujoch (3580 m)
Santis (2490 m)
!
Gd!St!Bernard (2472 m)
!
!
Arosa (1840 m)
!
!
Davos!Dorf (1590 m)
!
Montana (1508 m)
!
Temperature anomaly (degrees Celsius)
Engelberg (1035 m)
Chateau d'Oex (985 m)

!
Bern!Liebefeld (565 m)
!
Zurich!MeteoSchweiz (556 m)
!
Bad Ragaz (496 m)

!
Neuchatel (485 m)
!
Oeschberg!Koppigen (483 m)
!
!
Montreux!Clarens (405 m)
!
!
Locarno!Monti (366 m)
!
!
!
Basel!Binningen (316 m)
!
Lugano (273 m)
2001
2002
2003
2004
2005
61
Geostatistics of extremes
Basic setup:

want to model extremes of process Y (x, t), (x, t) X T R3

time series (maybe intermittent)could be annual maxima, or daily values, or . . .
data available at
sites xd XD = {x1 , . . . , xD } X
times Td = {td,1 , . . . , td,nd }, for d {1, . . . , D}

exposition simplified if Td T = {t1 , . . . , tn }
Aim to compute distributions of quantities such as

Z
r(x, t)I {Y (x, t) ydanger } dx
R(t) =
X
where r(x, t) is population at risk if Y (x, t) exceeds some level ydanger at time t
Approaches
Four (?) main approaches:
latent variable (often Bayesian) approach
copulas
HeffernanTawn
multivariate extremes (max-stable processes, Smith 1990)
Latent variable approach

Conditional on underlying process S(x), observations Y (x), for x X follow an extremal distribution
Examples:
Y (x)
Y (x)

|
|
ind
S(x) = ((x), (x), (x)) GEV{y; S(x)},

ind
S(x) = ((x), (x)) GPD{y; S(x)},
S(x) N3 {(x), (x)}
S(x) N2 {(x), (x)}
Examples: Casson and Coles (1999, Extremes); Cooley et al. (2007, JASA)
Could use copulas to transform margins to Gaussian, then fit geostatistical modelsGaussian
anamorphesis
Advantages: computationally feasible for large-scale problems using standard simulation techniques
(MetropolisHastings algorithm, . . .), possibility of estimating probabilities for complex events
Disadvantages: all extremal dependencies are incorporated through S(x); marginal distributions are not
extremal; difficult to incorporate full range of possible extremal dependencies
62
HeffernanTawn (2004)
Use decomposition
Pr(Y C) =
where C =

d Cd
D
X
d=1
EYd {Pr(Yd Cd | Yd )f (Yd )} ,
and Cd Cc = , for c 6= d, with

Cd = C {y RD : FYd (yd ) > FYc (yc ), c = 1, . . . , D, c 6= d}
Use GPD for Yd and nonparametric linear model for conditional probability, and simulate to estimate
Pr(Y C).
Advantages: can deal with large D, extends to near-independence models
Disadvantages: models on different Cd need not be coherent, uniqueness of representation for conditional
probability unclear, inference messy
Max-stable processes
General setup:
Z(x) Frechet(1), for x X , so if the Zm () are independent and identically distributed, then
m1 max{Z1 (x), . . . , Zm (x)} Frechet(1)
Joint distribution at any subset D = {x1 , . . . , xd } of sites has multivariate extreme-value

distribution, and extremal coefficient
Z
max wd dH(w1 , . . . , wD ),
D =
SD dD
where D = |D|, SD is the unit simplex in RD , and H is a measure on SD with all its marginal
expectations equal to 1; we have 1 D D.
Extremal coefficient
Summary of dependence in subset of variables
If Z1 , . . . , Zd all marginally unit Frechet, and joint distribution is max-stable, then

Pr{Z1 z, . . . , Zd z} = exp(D /z),
z > 0,
where extremal coefficient D depends on subset.

Interpretation: 1 D d, where
= 1 corresponds to complete dependence of maxima in subset,

= d corresponds to independence of maxima in subset

Not a complete summary of joint distribution, but basis of useful diagnostics, as can estimate D quite
easily.
Rainfall example (sketch!)
63
Madogram
Exploratory tool (analogous to variogram), designed for dealing with many extremes on a map
F -madogram (Poncet, Cooley, Naveau, 2006/7?)

1
2 E[|F {Y
(x + h)} F {Y (x)}|] =
1 (h) 1
,
2 (h) + 1
where (h) is pairwise extremal coefficient at range h

Extended by Naveau et al. (2006) to estimation of dependence function Vh in expression
Pr {Y (x) y1 , Y (x + h) y2 } = exp {Vh (y1 , y2 )} ,
where
Vh (y1 , y2 ) = 2
max
w 1w
,
y1 y2
dHh (w).
Spectral representations I
de Haan (1984):
A continuous (in probability) max-stable process Z(x) may be expressed as

D
Z(x) = max Uk f (x Tk ),
k
where (Uk , Tk ) are the points of a Poisson process on R+ [0, 1] with measure du/u2 (dt),
where is a finite measure on [0, 1] and fk are non-negative L1 functions.
Interpretation in terms of storms of sizes Uk and shape f centred at Tk
Exploited by Smith (1990), Coles (1993), Coles and Walshaw (1994), de Haan and Pereira (2006)
with various choices of f (normal, t, Laplace, circular)
Can compute joint density of Z(x1 ), Z(x2 ), but no further
64
Spectral representations II
Schlather (2002):
Let V (x) be a stationary process on Rd with = E max{0, V (x)} < , and let be a Poisson process on
(0, ) with intensity 1 ds/s2 . If the Vs (x) are independent copies of V (x), then
Z(x) = max sVs (x),
s
is a stationary max-stable random process with unit Frechet margins.

Interpretation in terms of maxima of random sheets

Example: Vs () stationary istropic Gaussian processes with correlation (h), then
log Pr{Z(x1 ) z1 , Z(x2 ) z2 } =

1
2
1
1
+
z1
z2
1/2 !
{(h) + 1}z1 z2
1+ 12
(z1 + z2 )2
Corresponding extremal coefficient (h) = 1 + 21/2 {1 (h)}1/2 has natural bounds (Schlather and
Tawn, 2003)
Can only represent positive dependencebut most likely in practice
Pairwise likelihood
Data Z1 , . . . , Zn are from (unavailable) full joint density f (z1 , . . . , zn ; ), yielding log likelihood
() = log f (z1 , . . . , zn ; ).
If lower-order marginal densities are available, construct composite likelihood by taking product of
(non-independent!) densities.
Simplest example is pairwise log likelihood

2 () =
log f (zi , zj ; ),
i>j
constructed from all distinct disjoint pairs of observations.

iid
j
If is identifiable from the pairwise marginal densities, and if Z 1 , . . . , Z n f (z; ), with Z j = (Z1j , . . . , ZD
), then
under mild regularity conditions the maximum pairwise likelihood estimator is consistent, and satisfies
n
o
1 K()J(
)
1 as n .
N , J()
65
Swiss summer temperature data

For illustration:

annual maximum temperature data at D = 17 Swiss sites, 19612006

fit GEV to standardised values Y (xd , tj ) with
dtj = d0 + d1 tj ,
d ,
d ,
d = 1, . . . , 17, j = 1, . . . , 46,
iid

and obtain Zdtj Frechet(1) using estimated probability integral transform

estimate surfaces for b0 , b1 , b, b using splines
use likelihood estimation to obtain bij for each pair of sites (model checking)
use pairwise likelihood to fit stationary isotropic covariance function

(u) = (1 1 ) + 1 exp{(u/2 )3 },
0 1 1, 2 , 3 > 0,
with estimated values 1 = 0.62 (0.2), 2 = 360 (100)km, 3 = 1.59 (1.29)

simulate max-stable random fields Z (x) from fitted model, then transform back to real scale Y (x) and
assess . . .
66
50.0
Station Engelberg
0.5
Station GdStBernard
2.0
10.0
10.0 50.0
0.5
1.0
5.0
50.0
0.5
50.0
50.0
10.0 50.0
Station Montana
2.0
0.5
2.0
10.0 50.0
Station Lugano
5.0
0.2
Station MontreuxClarens
1.0
5.0
50.0
Station Neuchatel
0.2
1.0
5.0
50.0
Station OeschbergKoppigen
10.0 50.0
Station DavosDorf
50.0
2.0
10.0 50.0
0.5
2.0
10.0 50.0
0.2 1.0 5.0
10.0 50.0
5.0
0.2
2.0
50.0
2.0
1.0
50.0
Station LocarnoMonti
0.5
0.2
5.0
0.5
0.2 1.0 5.0
Station Chateau dOex
1.0
2.0
50.0
10.0 50.0
5.0
0.2
10.0 50.0
5.0
0.5
1.0
50.0
0.5
1.0
2.0
10.0 50.0
2.0
0.5
0.2
5.0
2.0
10.0 50.0
2.0
0.2
Station BernLiebefeld
1.0
Station BaselBinningen
0.5
0.5
2.0
10.0 50.0
Station Bad Ragaz
50.0
0.5
0.2
0.5
10.0 50.0
0.5
2.0
10.0 50.0
0.5
Station Arosa
0.2 1.0 5.0
2.0
10.0 50.0
50.0
10.0 50.0
10.0
2.0
2.0
0.5
0.5
0.5
2.0
10.0 50.0
2.0
0.5
0.5
2.0
10.0 50.0
Fit of marginal model
50.0
0.5
Station Jungfraujoch
2.0
10.0 50.0
0.5
Station Satis
5.0
50.0
Station ZrichMeteoSchweiz
Estimated correlations
1.0
0.5
0.0
1.0
0.5
Coefficient estimated from Schlather model
0.5
0.0
0.5
1.0
Coefficient estimated from Schlather model
1.0
Individual points: MLEs of correlations 2 SE (grey bars) as a function of distance (103 km) between pairs of
points
Solid line: fitted correlation estimated using pairwise likelihood
Left: temperature data; right: simulated data
0.0
0.2
0.4
0.6
0.8
1.0
0.0
Distance between two stations

Schlather model coefficients (red points) and their confidence intervals (gray error bars) and Weibull model curve vs. distance.
0.2
0.4
0.6
0.8
1.0
Distance between two stations
67
Fit of correlation curve

Normal QQ plot of {g(b
ij ) g(
ij )}/SE, for Fisher z transform g
1
0
2
Sample Quantiles
Normal QQ Plot
Theoretical Quantiles
68
69
Scale is standardized relative to robust location and scale at each site

For illustration, following pages show simulated fields y (x, 2007) ordered according to values of
Z
X
y (x, 2007) dx
Simulated fields
5.0
50.0
5.0
50.0
50.0
0.1
0.5
50.0
0.5
5.0
50.0
5.0
0.5
5.0
50.0
5.0
0.5
5.0
50.0
pair(1,13) altitudes=(1840,405)
0.1
0.5
5.0
50.0
0.1
0.5
5.0
50.0
0.1
0.5
5.0
50.0
0.5
5.0
0.5
0.5
0.1
0.1
0.1
0.5
0.1
0.1
50.0
5.0
50.0
0.1
50.0
5.0
0.5
5.0
0.1
0.1
0.5
50.0
0.5
5.0
0.5
50.0
0.1
0.1
0.1
0.5
5.0
0.5
0.1
0.1
50.0
5.0
0.1
50.0
5.0
5.0
5.0
50.0
5.0
50.0
0.5
0.5
50.0
0.5
0.5
5.0
0.1
0.1
0.5
5.0
0.1
0.1
50.0
50.0
5.0
50.0
50.0
50.0
5.0
50.0
0.5
0.1
0.5
5.0
50.0
5.0
0.1
0.5
5.0
0.1
0.5
5.0
50.0
0.5
0.5
0.1
0.1
0.5
5.0
0.1
0.5
50.0
50.0
5.0
0.1
0.5
5.0
50.0
Pairwise fits
50.0

0.5
0.1
0.1
0.1
500th hottest year out of 1000 realisations for 2007.

8
10

8
10
45.5
45.5
47.5
47.5
47.0
47.0
46.5
46.5
46.0
46.0
48.0
48.0

6

10
10
45.5
45.5
47.5
47.5
47.0
47.0
46.5
46.5
46.0
46.0
48.0
48.0

6

10
10
45.5
45.5
47.5
47.5
47.0
47.0
46.5
46.5
46.0
46.0
48.0
48.0
Discussion
Schlather representation is very general, can envisage for other types of data:
rainfall time series at a single site, using addition of a random set (Mehdi)
rainfall in space and time?
snowfall in space (Juliette?)
etc.
Modelling issues:
What processes are sensible? Gaussian random fields? Levy processes?
How to extend to near-independence cases?
How to build in covariates? Smoothing? Pre-whitening or not?
How best to perform estimation and testing?
Bayesian inference?
How to build in physical knowledge of underlying processes?

70

Coles and Davison - Statistical Modelling of Extreme Values - June 2008

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Coles and Davison - Statistical Modelling of Extreme Values - June 2008

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Statistical Modelling of Extreme Values

Stuart Coles and Anthony Davison

Limitations of the GEV limit law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

January 2008 slide 2

Simplest case: X1 , . . . Xn F . Require accurate inferences on tail of F .

there are very few observations in the tail of the distribution;

January 2008 slide 4

weakest-link type models

Growing areas of application include: finance, insurance, telecommunications, athletic records,

January 2008 slide 5

Examples: Annual maximum sea levels

Annual maximum sea levels at Port Pirie, Western Australia.

January 2008 slide 6

Examples: Breaking strengths of glass fibres

Here minima are of interest.

January 2008 slide 7

Examples: Dependence on covariates

Fremantle annual maximum sea levels: apparent trend in time.

Apparent dependence on the Southern Oscillation Index (an indicator of El Nino).

January 2008 slide 8

Race Time (secs.)

Examples: Fastest annual times for womens 1500m

There is an obvious time trend.

January 2008 slide 9

Examples: Largest order statistics

Largest ten (available) annual sea levels at Venice.

January 2008 slide 10

Daily Rainfall (mm)

Examples: Threshold exceedances

Daily rainfall accumulation (location in south-west England)

January 2008 slide 11

Daily Minimum Temperature (Degrees Below 0 F.)

Daily minimum temperatures (Wooster, Canada).

January 2008 slide 12

Examples: Financial time series

January 2008 slide 13

Annual Maximum Wind Speed (knots) at Hartford (CT)

Examples: Multivariate extremes

Annual Maximum Wind Speed (knots) at Albany (NY)

Annual maximum wind speeds at 2 different locations (North East U.S.)

January 2008 slide 14

1920s: Foundations of asymptotic argument developed by Fisher and Tippett

1970s: Classic limit laws generalized by Pickands

1980s: Leadbetter (and others) extend theory to stationary processes

1990s: Multivariate and other techniques explored as a means to improve inference

2000s: Interest in spatial and spatio-temporal applications, and in finance

January 2008 slide 15

de Haan and Ferreira (2006) Extreme Value Theory: An Introduction, SV

R packages evd, evdbayes, evir, extRemes, fExtremes, POT

Journal Extremes (published by Springer)

January 2008 slide 16

The expression of such stability requirements as mathematical statements leads to asymptotic

January 2008 slide 18

Probability framework for block maxima distribution

Let X1 , . . . , Xn F and define

But F is unknown, so approximate F n by limit distributions as n.

What distributions can arise?

Obviously, if F (x) < 1, then F (x)n 0, as n .

January 2008 slide 19

Classical limit laws

recall the Central Limit Theorem: with n = and n = / n,

Same applies here: we seek limits of

January 2008 slide 20

Extremal types theorem