FRM二级模拟真题精选:Application of extreme value theory

Let X be a random variable representing the daily loss of your portfolio.The“peaks over threshold”(POT)approach considers a threshold value,u,of X and the distribution of excess losses over this threshold.Which of the following statements about this application of extreme value theory is correct?
 
A.To apply the POT approach,the distribution of X must be elliptical and known.

B.If X is normally distributed,the distribution of excess losses requires the estimation of only one parameter,β,which is a positive scale parameter.
 
C.To apply the POT approach,one must choose a threshold,u,which is high enough that the number of observations in excess of u is zero.
 
D.As the threshold,u,increases,the distribution of excess losses over u converges to a generalized Pareto distribution.

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