Busıness Fınance Iı Deneme Sınavı Sorusu #1037008
Why does the Extreme Value Theory (EVT) approach have the potential to perform better than the VCV, MC simulation, and HS approaches?
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Because it estimates VaR by first assuming that a portfolio comprises a small number of risk factors. |
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Because it employs nonparametric method to eliminate the misspecified distribution. |
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Because it simulates the changes in the portfolio value by randomly drawing from the imposed theoretical distribution function. |
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Because it assumes that changes in the values of assets are stationary and independent over time. |
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Because the accurate forecasts of extreme realizations are crucial to VaR analysis. |
Since the accurate forecasts of extreme realizations are crucial to VaR analysis, the EVT approach has the potential to perform better than the VCV, MC simulation, and HS approaches. The correct answer is E.
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