Joint Extremes in Temperature and Mortality: A Bivariate POT Approach

24 Pages Posted: 5 Dec 2019

See all articles by Han Li

Han Li

Macquarie University

Qihe Tang

UNSW Sydney

Date Written: November 19, 2019

Abstract

This paper contributes to insurance risk management by modeling extreme climate risk and extreme mortality risk in an integrated manner via extreme value theory (EVT). We conduct an empirical study using monthly temperature and death data in the U.S., and nd that the joint extremes in cold weather and old-age death counts exhibit the strongest level of dependence. Based on the estimated bivariate generalized Pareto distribution, we quantify the extremal dependence between death counts and temperature indexes. Methodologically, we employ the cutting edge multivariate peaks over threshold (POT) approach, which is readily applicable to a wide range of topics in extreme risk management.

Keywords: Extreme Value Theory, Bivariate Pot, Climate Change, Actuaries Climate Index, Mortality Risk

JEL Classification: C32, G22, J11, Q54

Suggested Citation

Li, Han and Tang, Qihe, Joint Extremes in Temperature and Mortality: A Bivariate POT Approach (November 19, 2019). Available at SSRN: https://ssrn.com/abstract=3490322 or http://dx.doi.org/10.2139/ssrn.3490322

Han Li (Contact Author)

Macquarie University ( email )

New South Wales 2109
Australia

Qihe Tang

UNSW Sydney ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia

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