Three benefits of market risk measurement to the management of financial institutions are listed below. Two of the explanations of the benefits are incorrect. Identify the two benefits that have an incorrect explanation and given reasons for your choice.

Benefit 1: Setting limits. Explanation: The setting of limits is important for complying with regulatory requirements.

Benefit 2: Performance evaluation. Explanation: Provides information to senior management of a financial institution about risks taken by traders.

Benefit 3: Resource allocation. Explanation: compares returns to market risk in diverse areas of trading.