Chapter 3: Theory of Extreme Events

In the face of uncertainty, nature promotes configurations allowing for the maximum number of ‘microscopic’ states. A shattered cup is more likely to be found under uncertainty than an intact one, as smithereens allow for overwhelmingly more disordered ‘microscopic’ states than a single state of an intact cup.

In this chapter, we discuss on that the factors responsible for the objective type of uncertainty (arising due to volatile environments) and those responsible for the subjective type of uncertainty (arising from subjective imperfections) may evolve on different time scales. This simple observation allows us to formulate a meaningful mathematical approach to extreme events.