What is extreme value theory (EVT)? What are its limitations?

Extreme Value Theory (EVT) is a branch of statistics that deals with the extreme deviations or the rare events in a given dataset. It focuses on modeling the tail behavior of probability distributions, particularly the behavior of extreme values that lie in the upper or lower ends of the distribution. EVT is particularly useful in fields such as insurance, finance, environmental science, and engineering, where understanding the impact of extreme events (like floods, stock market crashes, or large claims in insurance) is crucial.

The fundamental goal of EVT is to model the behavior of extreme values, particularly the maximum or minimum values in a dataset over a given period. It provides a framework for predicting the occurrence of extreme events and estimating the likelihood and magnitude of future extremes. EVT relies _______ _______ _______ _____ _____.
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