aianjie

 

7、All of the following are extreme value theory models EXCEPT:

A) block Maxima. 

B) semi-parametric peaks-over-threshold. 

C) generalized Pareto distribution. 

D) stressed VAR. 

aianjie

 

The correct answer is D

Stressed VAR is not an EVT model.

 

aianjie

 

8、Under the Extreme Value Theorem (EVT), which of the following is (are) TRUE regarding the modeling of market risk?

I.           The three key resulting distributions are: Gumbel, Weibull, and Frechet.

II.         EVT permits the analysis of maxima and minima distributions.

III.        EVT is does not account for “heavy” tails observed in the market place.

IV.      EVT is dependent upon the normal distribution.

A) I and III only.

B) I only.

C) None of these.

D) I and II only.

aianjie

 

8、Under the Extreme Value Theorem (EVT), which of the following is (are) TRUE regarding the modeling of market risk?

I.           The three key resulting distributions are: Gumbel, Weibull, and Frechet.

II.         EVT permits the analysis of maxima and minima distributions.

III.        EVT is does not account for “heavy” tails observed in the market place.

IV.      EVT is dependent upon the normal distribution.

A) I and III only.

B) I only.

C) None of these.

D) I and II only.

aianjie

 

The correct answer is D

Statement III is incorrect because EVT allows for “heavy” tails as we see in the market place. Statement IV is incorrect because EVT is not dependent upon the normal distribution.

 

aianjie

 

9、Which of the following statements is (are) FALSE concerning extreme value distributions?

Using block maxima, local maxima may not resemble extreme observations.

Small tails reduce the variance of the estimator in cluster analysis.

The two classes of EVT models are block maxima and generalized extreme value distribution.

A) I and II only.

B) I and III only.

C) I, II, and III.

D) II and III only.

aianjie

 

The correct answer is D

Small tails decrease the number of extreme observations increasing the variance. Block maxima and peaks-over-threshold are the two classes of EVT distributions.

 

aianjie

 

10、Extreme value theory (EVT) can assist with value-at-risk (VAR) calculations by providing better probability estimates of observing extreme losses than that indicated by a standard normal distribution because:

A) the observed empirical distribution of most asset returns tends to be platykurtic.

B) extreme losses appear to occur less frequently than indicated by a normal distribution.

C) extreme losses appear to occur more frequently than indicated by a normal distribution.

D) EVT is the most efficient method for estimating extreme losses.

aianjie

 

The correct answer is C

Extreme losses appear to occur with a higher frequency than indicated by a normal distribution. EVT has been shown to generate more realistic probability estimates for extreme losses than a normal distribution.

 

aianjie

 

11、Under the Extreme Value Theorem (EVT), which of the following is (are) TRUE regarding the modeling of market risk?

I.           The three key resulting distributions are: Lognormal, Weibull, and Pareto.

II.         EVT permits the analysis of maxima distributions.

III.        EVT does nto account for "heavy" tails observed in the market place.

IV.      EVT is dependent upon the normal distribution.

A) I and IV only.

B) None of these.

C) I and II only.

D) I and III only.