Question
The following traits are used with Value-at-Risk: I. VaR requires the assumption that returns are normally distributed. II. VaR provides a metric that measures how
The following traits are used with Value-at-Risk:
I. VaR requires the assumption that returns are normally distributed.
II. VaR provides a metric that measures how much a portfolio will lose over a year.
III. VaR often ignores that returns may not be normally distributed, exhibit kurtosis/fat tails
IV. VaR metrics is calculated using the delta-normal method, simulations based on sufficient historical data or Monte Carlo simulation.
V. A 95% VaR informs portfolio managers how much is expected to be lost 5% of the time.
I., II. and IV. only
II. III. and V. only
III. and IV. only
V. and II. only
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