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Financial Risk Manager Part 2

Financial Risk Manager Part 2

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The CRO of a regional bank expresses concern in a meeting of the risk team that the bank's internal risk models are not adequately assessing potential random extreme losses. A risk analyst asks if implementing a model based on extreme value theory (EVT) would address the CRO's concern. Which of the following is correct when applying EVT and examining distributions of losses exceeding a threshold value?

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