A financial firm has invested in an asset in an emerging market and would like...
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Accounting
A financial firm has invested in an asset in an emerging market and would like to compute a 5% monthly VaR for the assets returns. The asset, being in an emerging market, has only been in existence for 9 years and so the fund has data only on 108 monthly returns. An analyst at the firm has recently taken a course on Risk Management, where she has heard about the semi-parametric method of Extreme Value Theory (EVT) used in computing VaR. She has learned that the method is quite robust because it does not make very strong assumptions in modeling and so she is thinking of using EVT to compute the assets VaR. In the context of her situation, would you recommend that she use EVT?
a) Yes b) No
Please provide a BRIEF (one or two sentences will suffice) justification of your choice.
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