Financial Risk Manager Part 2
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During a recent risk team meeting at a regional bank, the Chief Risk Officer (CRO) expressed concerns about the bank's internal risk models, specifically their inadequacy in properly assessing potential random extreme losses. A risk analyst considers whether implementing a model based on extreme value theory (EVT) would address these concerns. In the context of applying EVT to analyze distributions of losses that exceed a certain threshold, which of the following statements is correct?
During a recent risk team meeting at a regional bank, the Chief Risk Officer (CRO) expressed concerns about the bank's internal risk models, specifically their inadequacy in properly assessing potential random extreme losses. A risk analyst considers whether implementing a model based on extreme value theory (EVT) would address these concerns. In the context of applying EVT to analyze distributions of losses that exceed a certain threshold, which of the following statements is correct?
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