3.39. Generalized Pareto Distribution

Does @RISK handle a generalized Pareto distribution?

Yes, with the restriction that the shape parameter must be positive.

The generalized Pareto distribution takes three parameters: location μ (mu), scale σ (sigma), and shape k. The RiskPareto2 distribution takes three parameters: scale b, shape q, and optionally a location shift in the RiskShift( ) property function.

Conversion between the parameters:

scale: b = σ/k or σ = b/q
shape: q = 1/k or k = 1/q
location: μ = RiskShift value

Conversion between the functions:

GPD(μ, σ, k) is equivalent to RiskPareto2(σ/k, 1/k, RiskShift(μ))
RiskPareto2(b, q, RiskShift(μ)) is equivalent to GPD(μ, b/q, 1/q)

Last edited: 2017-05-02

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