DEFINING EMERGENCY SCALES BY THRESHOLDS UNCERTAINTY IN EXTREME EVENTS. THE RED QUEEN STATE AND THREE LEVELS OF EMERGENCY.

Veniamin L. Smirnov, Zhuanzhuan Ma, Dimitri Volchenkov

Research output: Contribution to journalArticlepeer-review

Abstract

An event is extreme if its magnitude exceeds the threshold.<br>A choice of a threshold is subject to uncertainty caused by a<br>method, the size of available data,a hypothesis on statistics, etc.<br>We assess the degree of uncertainty by the Shannon's entropy calculated<br>on the probability that the threshold changes on any given<br>day. If the amount of data is not sucient, an observer is in the<br>state of Lewis Carroll's Red Queen who said \When you say hill,<br>I could show you hills, in comparison with which you'd call that<br>a valley". If we have enough data, the uncertainty curve peaks at<br>two values clearly separating the magnitudes of events into three<br>emergency scales: subcritical, critical, and extreme. Our approach<br>is validated by 39 years of S&P500 historical data.

Fingerprint

Dive into the research topics of 'DEFINING EMERGENCY SCALES BY THRESHOLDS UNCERTAINTY IN EXTREME EVENTS. THE RED QUEEN STATE AND THREE LEVELS OF EMERGENCY.'. Together they form a unique fingerprint.

Cite this