A Survey of Approaches for Assessing and Managing the Risk of Extremes

In this paper, we review methods for assessing and managing the risk of extreme events, where extreme events are defined to be rare, severe, and outside the normal range of experience of the system in question. First, we discuss several systematic approaches for identifying possible extreme events. We then discuss some issues related to risk assessment of extreme events, including what type of output is needed (e.g., a single probability vs. a probability distribution), and alternatives to the probabilistic approach. Next, we present a number of probabilistic methods. These include: guidelines for eliciting informative probability distributions from experts; maximum entropy distributions; extreme value theory; other approaches for constructing prior distributions (such as reference or noninformative priors); the use of modeling and decomposition to estimate the probability (or distribution) of interest; and bounding methods. Finally, we briefly discuss several approaches for managing the risk of extreme events, and conclude with recommendations and directions for future research.     

The Elasticity of Demand for Microcredit: Evidence from Latin America

Microcredit demand is frequently assumed to be inelastic, yet understanding the price elasticity of demand for microcredit is highly relevant in designing appropriate microfinance institution (MFI) financial products and policy. This article extracts loan demand schedules and elasticities of MFI borrowers in the Dominican Republic using a unique survey instrument. We analyse the intensive margin of microcredit demand and find that client demand elasticities are not homogeneous and are correlated with certain borrower characteristics. Overall results suggest that these micro‐entrepreneurs, who have already entered the MFI market, have close to unit elastic demand for microcredit. The mean demand elasticity for our sample is ‐1.0.     

A New Lens on High School Dropout: Use of Correspondence Analysis and the Statewide Longitudinal Data System

The combination of log-linear models and correspondence analysis have long been used to decompose contingency tables and aid in their interpretation. Until now, this approach has not been applied to the education Statewide Longitudinal Data System (SLDS), which contains administrative school data at the student level. While some research has been conducted using the SLDS, its primary use is for state education administrative reporting. This article uses the combination of log-linear models and correspondence analysis to gain insight into high school dropouts in two discrete regions in Kentucky, Appalachia and non-Appalachia, defined by the American Community Survey. The individual student records from the SLDS were categorized into one of the two regions and a log-linear model was used to identify the interactions between the demographic characteristics and the dropout categories, push-out and pull-out. Correspondence analysis was then used to visualize the interactions with the expanded push-out categories, boredom, course selection, expulsion, failing grade, teacher conflict, and pull-out categories, employment, family problems, illness, marriage, and pregnancy to provide insights into the regional differences. In this article, we demonstrate that correspondence analysis can extend the insights gained from SDLS data and provide new perspectives on dropouts. Supplementary materials for this article are available online.