1. A little bit sometimes goes a lot further than you think
Micro Correlations
Tail Dependence
Fat Tails
Micro-correlations
A little bit sometimes goes a lot further than you think
Cooke and Kousky nsf#

2. You’re an Insurance CEO, With Blue Agent and Green Agent
since they’re picking counties randomly, their portfolios will be uncorrelated
choose 500 counties at random and buy all the flood insurance policies you can find

5. %$#! If they BOTH have a bad year I’m broke !!!

6. Look at the data:

11. “Neighbor” Correlations !
What’s going on????

13. Each blue county is very near a green county
If Blues are independent and Greens are independent, then SUMS are correlated like Neighbors…..in THIS data about 0.5

14. There’s something else….Lets find out
Simulation

15. Micro Correlations: too small to see  too small to be
Tail Dependence
Fat Tails
The Unholy Trinity: