In Calculating the Value at Risk (VAR) of Fixed-Income Securities

question 10

Multiple Choice

In calculating the value at risk (VAR) of fixed-income securities in the RiskMetrics model,

• A)the VAR is related in a linear manner to the DEAR.
• B)the price volatility is the product of the modified duration and the adverse yield change.
• C)the yield changes are assumed to be normally distributed.
• D)All of the options.
• E)the price volatility is the product of the modified duration and the adverse yield change and the yield changes are assumed to be normally distributed.

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Definitions:

Psychosocial Development

The theory proposed by Erik Erikson that human development is a life-long process divided into eight stages, each characterized by a different challenge or crisis.

Erikson's Third Stage

In Erik Erikson's theory of psychosocial development, this stage is known as the Initiative vs. Guilt phase, occurring between ages 3 and 5, focusing on children developing a sense of purpose through play and social interactions.

Empathy

The ability to comprehend and share another person's feelings or mental state.

Contextual Perspective

The approach of considering the influence of environmental, social, and historical contexts on events, behaviors, and decisions.