When Assessing Tail Risk by Looking at the 5% Worst-Case

question 34

Multiple Choice

When assessing tail risk by looking at the 5% worst-case scenario, the most realistic view of downside exposure would be

• A) expected shortfall.
• B) value at risk.
• C) conditional tail expectation.
• D) expected shortfall and value at risk.
• E) expected shortfall and conditional tail expectation.

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Definitions:

Fixed Expenses

Costs that do not fluctuate with changes in production level or sales volume, such as rent.

Contribution Margin

The amount by which the sales price of a product exceeds its variable costs, contributing to covering fixed costs and generating profit.

Fixed Costs

Expenses that do not change with the level of production or sales activity, such as rent, salaries, and insurance.

Net Income Target

A net income target is a predefined earnings figure that a company aims to achieve within a specific time frame.