medium · FRM Part 2 Market Risk
A risk manager uses the Cornish-Fisher expansion to adjust a VaR estimate.
What is the primary purpose of this semi-parametric repair?
- To reduce the dimensionality of a large covariance matrix.
- To adjust the normal distribution quantiles for skewness and kurtosis.
- To model the extreme tail using the Generalized Pareto Distribution.
- To account for time-varying volatility in historical simulation.
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