hard · FRM Part 2 Market Risk
A risk manager is utilizing the Peaks-over-Threshold (POT) framework to estimate tail risk for a hedge fund portfolio. Given a sample size n = 5,000 days, a threshold u = $20 million, and N_u = 250 exceedances, the Generalized Pareto Distribution (GPD) parameters are estimated as shape ξ = 0.40 and scale β = 5.0. Calculate the 99% Value-at-Risk (VaR_99%) for this portfolio.
- $38.75 million
- $47.16 million
- $25.64 million
- $31.30 million
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