If the Daily 90% Confidence Level VaR of a Portfolio

question 263

Multiple Choice

If the daily 90% confidence level VaR of a portfolio is correctly estimated to be USD 5,000.00, one would expect that:

• A) in 1 out of 10 days, the portfolio value will decline by USD 5,000.00 or less.
• B) in 1 out of 90 days, the portfolio value will decline by USD 5,000.00 or less.
• C) in 1 out of 10 days, the portfolio value will decline by USD 5,000.00 or more.
• D) in 1 out of 90 days, the portfolio value will decline by USD 5,000.00 or more.

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Definitions:

Breakdown Costs Model

A model that analyzes the costs associated with equipment or system failures, including repair, loss of productivity, and impacts on downstream processes.