medium · FRM Part 1
How does the Cornish-Fisher expansion adjust the Value-at-Risk (VaR) of a portfolio that exhibits significant positive excess kurtosis?
- It decreases the VaR to reflect the diversification of tail risk.
- It increases the VaR by pushing the critical quantile further into the tail.
- It leaves the VaR unchanged if the distribution is symmetric.
- It replaces the standard deviation with the mean absolute deviation.
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