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%
Sign up free to see the explanation and track your rank →
More FRM Part 2 Market Risk practice
- The Hill estimator is primarily used to provide a direct estimate of which parameter?
- What is the base capital multiplier (m) applied to a bank's internal model market risk…
- If a bank records 11 exceptions in a 250-day backtesting window for 99% VaR, what is the…
- What happens to the mean of a GPD-distributed variable if the tail index ξ ≥ 1?
- What is the maximum 'plus-factor' added to the base multiplier of 3.0 for a bank that…
- Which fixed-income mapping technique treats a bond portfolio as a single zero-coupon bond…
- What happens to the VaR estimate if we move from a thin-tailed (Gumbel, ξ = 0) model to a…
- In the GPD framework, if the threshold u is chosen too low, what is the most likely error…
All Market Risk questions · FRM Part 2 study guide · FRM Part 2 glossary · FRM Part 2 flashcards