Normal mixtures, EVT and the t-distribution are all possible solutions addressing the issue of heavy tails in financial returns.
EWMA and GARCH address volatility clustering, which is the other problem when doing risk calculations. Therefore Choice 'b' is the correct answer as EWMA is not used to address heavy tails but volatility clustering.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit