Assume That Exchange Rate Movements Were Unusually Stable in a Recent

question 30

True/False

Assume that exchange rate movements were unusually stable in a recent period (but will not continue to be so stable in the future) that was used to derive the estimated maximum expected loss based on the VaR method. The estimated expected loss derived using VaR based on that recent period will likely overestimate the actual maximum expected loss in the future.

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Definitions:

Confirmation Bias

The tendency to focus on information relevant to a belief and ignoring or downplaying information that is inconsistent with that belief.

Anchoring and Adjustment

A cognitive bias where individuals rely too heavily on an initial piece of information (the "anchor") when making decisions, with adjustments made too conservatively.

Representativeness

A cognitive heuristic where an individual judges the probability or frequency of an event by how much the event resembles the typical case.

Availability

The state of being able to be used or obtained; accessibility.