Free Preparation Discussions
MENU
PRMIA 8010 Exam - Topic 1 Question 26 Discussion
Topic #: 1
A zero coupon corporate bond maturing in an year has a probability of default of 5% and yields 12%. The recovery rate is zero. What is the risk free rate?
Extreme value theory focuses on the extreme and rare events, and in the case of VaR calculations, it is focused on the right tail of the loss distribution. In very simple and non-technical terms, EVT says the following:
1. Pull a number of large iid random samples from the population,
2. For each sample, find the maximum,
3. Then the distribution of these maximum values will follow a Generalized Extreme Value distribution.
(In some ways, it is parallel to the central limit theorem which says that the the mean of a large number of random samples pulled from any population follows a normal distribution, regardless of the distribution of the underlying population.)
Generalized Extreme Value (GEV) distributions have three parameters: (shape parameter), (location parameter) and (scale parameter). Based upon the value of , a GEV distribution may either be a Frechet, Weibull or a Gumbel. These are the only three types of extreme value distributions.
Aron
4 months agoEleni
4 months agoReita
4 months agoAdelina
4 months agoGlory
4 months agoJacquelyne
5 months agoAmie
5 months agoBarrie
5 months agoGail
5 months agoLeslee
5 months agoRoyce
5 months agoRebecka
5 months agoElvera
10 months agoMerlyn
8 months agoSelene
8 months agoErick
9 months agoLavonne
10 months agoChristiane
9 months agoLenna
9 months agoLetha
10 months agoRickie
10 months agoDan
10 months agoJohna
10 months agoDesmond
10 months agoDong
10 months agoMarsha
11 months agoBlondell
10 months agoJamal
10 months agoHyun
10 months agoLaurel
10 months agoRickie
11 months ago