hard · FRM Part 2 Market Risk
An institutional portfolio manager uses the 'Hill Estimator' to estimate the tail index of a heavy-tailed loss distribution. Given the 50 largest losses (x_i) out of a sample of 2,000 days, the mean log-excess above the threshold u = $10 m is calculated as 0.40.
What is the estimated probability of a loss exceeding $20 m on any given day?
- 1.25%
- 0.15%
- 2.50%
- 0.44%
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