Peak Over Threshold Method

The Peak Over Threshold (POT) method is a statistical approach used to analyze rare, extreme events, like heavy rainfall or financial crashes. It involves selecting a high threshold and focusing only on data points that exceed this level, which represent the extreme events. By modeling these excesses with specialized probability distributions, the method helps estimate the likelihood and potential severity of rare events beyond observed data. This approach is valuable for risk assessment and planning in fields where understanding extreme outcomes is critical.