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PRMIA Exam 8010 Topic 1 Question 36 Discussion

Actual exam question for PRMIA's Operational Risk Manager (ORM) Exam exam
Question #: 36
Topic #: 1
[All Operational Risk Manager (ORM) Exam Questions]

Which of the following are valid approaches for extreme value analysis given a dataset:

1. The Block Maxima approach

2. Least squares approach

3. Maximum likelihood approach

4. Peak-over-thresholds approach

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Suggested Answer: C

For EVT, we use the block maxima or the peaks-over-threshold methods. These provide us the data points that can be fitted to a GEV distribution.

Least squares and maximum likelihood are methods that are used for curve fitting, and they have a variety of applications across risk management.


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