University Of Montana Operations And Supply Chain Management Assignment Help - Extreme value

Question - Extreme value theory (EVT) provides valuable insight about the tails of return distributions. Which of
the following statements about EVT and its applications is incorrect?
A. The peaks over threshold (POT) approach requires the selection of a reasonable threshold, which
then determines the number of observed exceedances; the threshold must be sufficiently high to
apply the theory, but sufficiently low so that the number of observed exceedances is a reliable
estimate.
B. EVT highlights that distributions justified by the central limit theorem (e.g., normal) can be used for
extreme value estimation.
C. EVT estimates are subject to considerable model risk, and EVT results are often very sensitive to
the precise assumptions made.
D. ...Read More Because observed data in the tails of distribution is limited, EV estimates can be very sensitive to
small sample effects and other biases. ...Read Less

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