PRMIA Exam 8010 Topic 1 Question 41 Discussion

Actual exam question for PRMIA's Operational Risk Manager (ORM) Exam exam

Question #: 41
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

A2 and 3

B1, 3 and 4

C1 and 4

DAll of the above

Show Suggested Answer

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.

by Simona at Feb 12, 2024, 12:46 AM

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1 days ago

I agree with you on the Block Maxima approach, but I also believe that the Maximum likelihood approach is valid.

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2 days ago

I think the valid approaches for extreme value analysis are the Block Maxima approach and the Peak-over-thresholds approach.

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