Quantile Regression Motivation for Tail Risk - Quant Trader Interview Question
Difficulty: Hard
Category: Statistics & Regression
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Topics: quantile-regression, tail-risk, var, ols, regression
Problem Description
A risk manager is tasked with modeling Value at Risk (VaR) for a portfolio. They have historical data on portfolio returns and various macroeconomic factors. Why might the risk manager prefer quantile regression over Ordinary Least Squares (OLS) regression when modeling tail risk (e.g., estimating the 5% VaR)?
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