Extreme Events – Specimen Question A.4.2
[this page | pdf | references | back links | custom searches]
Question and Answer Summary
You are an investor trying to understand better the joint
behaviour of Indices A and B in Exercise A.2.1:
(a) Identify the
series corresponding to the principal components of Indices A and B.
(b) Given a linear
combination of Index A and B what is the maximum possible kurtosis of a linear
combination of A and B?
(c) More generally,
can you identify two series where the linear combination of the series with the
least variance is also the one with the maximum kurtosis? Hint: try identifying
two series with very few terms in them as it simplifies the relevant
(d) What lessons might you
when used to estimate the likelihood of extreme events?
Contents | Prev | Next | Chapter Questions