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The Risk of the Unseen

In: Modern Finance and Risk Management Festschrift in Honour of Hermann Locarek-Junge

Author

Listed:
  • Steffi Höse
  • Stefan Huschens

Abstract

What statements can be made from a statistical point of view about the probability of the existence of a black swan, if so far only white swans have been observed? We answer this question in the framework of a statistical model of repeated Bernoulli trials. Sixteen point estimates and ten interval estimates for the Bernoulli parameter are given based on different approaches to statistical inference, whereby the variety of methods ranges from the maximum likelihood method to Bayesian methods and ad hoc approaches.

Suggested Citation

  • Steffi Höse & Stefan Huschens, 2022. "The Risk of the Unseen," World Scientific Book Chapters, in: Tony Klein & Sven Loßagk & Mario Straßberger & Thomas Walther (ed.), Modern Finance and Risk Management Festschrift in Honour of Hermann Locarek-Junge, chapter 8, pages 173-196, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9781800611917_0008
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