
Ultimate access to all questions.
An investment bank employs a risk analyst to evaluate its application of Extreme Value Theory (EVT) for managing financial risks. This analyst's task involves examining and contrasting several methods used to calculate parameters associated with extreme values (EV) within the bank's operational loss distribution. The analyst must also thoroughly analyze the mechanisms, advantages, and disadvantages inherent in each method. Which of the following statements about a technique for estimating EV parameters is correct?
A
The regression method uses an ordered sample of losses to obtain least squares estimates of the EV parameters.
B
The maximum-likelihood method uses the average of a random number of the most extreme observations to estimate EV parameters.
C
The main challenge associated with the moment-based method is choosing the number of observations that minimizes the mean-squared-error loss function.
D
A drawback of the semi-parametric estimation method is that the Hill estimator is neither consistent nor asymptotically normal.