Question
Based on 800 daily returns on a portfolio, a manager has estimated the tail of the loss distribution using a threshold of u=5 ($millions). Based
Based on 800 daily returns on a portfolio, a manager has estimated the tail of the loss distribution using a threshold of u=5 ($millions). Based on the 80 losses that exceeded u (so L=u+y with y>0), she estimated the generalized Pareto distribution:
where y is also in units of $millions. Determine VaR0.999 from this model.
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International Finance
Authors: Maurice D Levi
5th Edition
0415774594, 9780415774598
