Robust Modeling of Extremes in the Presence of Inliers with Enhanced Tail Estimation

Abstract

Extreme value theory provides a fundamental framework for modeling rare and extreme events; however, threshold selection remains a persistent challenge, particularly in the presence of inliers such as instantaneous or early failures. Such observations commonly arise in applications including reliability studies and environmental data, where clusters of observations near the origin or at the origin can substantially distort classical threshold selection procedures and tail inference. In this paper, we propose a robust modeling framework that accounts for inliers, extremes, and the tail proportion. Parameter estimation is carried out using maximum likelihood. The proposed methodology is compared with classical numerical and graphical diagnostic tools, including the mean excess plot, parameter stability plot, Hill plot, and Pickands plot, as well as existing extreme value mixture models. The theoretical properties of the proposed model are established, and its performance is evaluated through extensive Monte Carlo simulations and real-data applications. The results demonstrate that the proposed methodology provides more accurate threshold estimation and more reliable extreme-value inference in the presence of inliers compared with existing classical approaches. Overall, the proposed methodology provides more accurate threshold estimation and tail inference in the presence of inliers, addressing key limitations of existing methods.