medium · FRM Part 2 Market Risk
A risk manager is using the Cornish-Fisher expansion to adjust a 99% VaR estimate for non-normality.
If the returns have a skewness of -0.6 and an excess kurtosis of 2.0, how will the adjusted z-score (q_CF) compare to the normal z-score (2.326)?
- q_CF will be exactly 2.326 × (1 + skewness).
- q_CF will be significantly larger than 2.326.
- q_CF will remain exactly 2.326.
- q_CF will be smaller than 2.326.
Sign up free to see the explanation and track your rank →
More FRM Part 2 Market Risk practice
- A leptokurtic distribution, often modeled by EVT, is characterized by which of the followi
- If a bank records 11 exceptions in a 250-day backtesting window for 99% VaR, what is the r
- In the GPD framework, if the threshold u is chosen too low, what is the most likely error
- In the Kupiec Likelihood Ratio test, what does the null hypothesis (H_0) state?
- The Hill estimator is primarily used to provide a direct estimate of which parameter?
- What happens to the mean of a GPD-distributed variable if the tail index ξ ≥ 1?
- What happens to the VaR estimate if we move from a thin-tailed (Gumbel, ξ = 0) model to a
- What is the base capital multiplier (m) applied to a bank's internal model market risk cap