PRMIA Exam 8010 Topic 1 Question 41 Discussion

Actual exam question for PRMIA's 8010 exam

Question #: 41
Topic #: 1

[All 8010 Questions]

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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Layla

6 months ago

That's an interesting point, Pansy. It's important to consider the purpose and suitability of each approach in extreme value analysis.

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Pansy

6 months ago

I believe the Maximum likelihood approach is not suitable for extreme value analysis as it focuses on parameter estimation rather than extreme values.

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Alexia

6 months ago

Really, Pansy? Can you explain your rationale for excluding the Maximum likelihood approach?

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Pansy

6 months ago

I'm not so sure. I think the valid approaches are the Block Maxima approach and the Peak-over-thresholds approach only.

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Layla

6 months ago

I agree with you, Alexia. Those three approaches make sense for extreme value analysis.

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Alexia

7 months ago

I think the valid approaches for extreme value analysis given a dataset are the Block Maxima approach, the Maximum likelihood approach, and the Peak-over-thresholds approach.

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Nathan

7 months ago

I personally prefer using the Least squares approach for extreme value analysis, so I would go with option A) 2 and 3.

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Danica

7 months ago

I think the correct answer is probably B) 1, 3 and 4, as all three approaches seem reasonable for extreme value analysis.

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Brittani

8 months 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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Aretha

8 months 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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