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PRMIA Exam 8010 Topic 1 Question 43 Discussion
Actual exam question for
PRMIA's
Operational Risk Manager (ORM) Exam exam
Question #: 43
Topic #: 1
[All Operational Risk Manager (ORM) Exam Questions]
Topic #: 1
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
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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