Exercise

# GEV risk estimation

Suppose that you were holding € 1,000,000 of GE stock on January 1, 2010. You would like to cover the *expected* maximum losses that might occur over the next week, based upon available data from the previous two years, 2008 - 2009. You assume that maximum weekly losses for GE are distributed according to a Generalized Extreme Value (GEV) distribution.

To model expected losses you'll estimate the CVaR at the 99% confidence level for the GEV distribution, and use it to compute the amount needed in reserve to cover the expected maximum weekly loss over January, 2010.

The `genextreme`

distribution from `scipy.stats`

is available in your workspace, as is GE's `losses`

for the 2008 - 2009 period.

Instructions

**100 XP**

- Find the maxima of GE's asset price for a one week block length.
- Fit the GEV distribution
`genextreme`

to the`weekly_maxima`

data. - Compute the 99% VaR, and use it to find the 99% CVaR estimate.
- Compute the reserve amount needed to cover the expected maximum weekly loss.