Which One of the Following Is Common Misinterpretation During the Calculation

question 227

Multiple Choice

Which one of the following is common misinterpretation during the calculation of VaR

• A) The VaR calculation is based on an assumption that the portfolio is held constant over the time interval in practice are actively managed so that as adverse condition develop actions will be taken to mitigate losses As a result the true probability of a lose as large as that predicted may be much less then Fore cast
• B) The VaR Forecast is based on what has happened in the past If the future is not like the past the realized losses may be the lager (or smaller then predicted)
• C) There is a tendency to interpret VaR as the largest loss that has on X percent probability of being exceeded. The largest that loss that may occur will not be too much larger than the aR, while for other portfolios (particularly those including highly levered derivatives), it may be many times greater than the VaR.
• D) All of the above.

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Definitions:

Depression

A common mental health disorder marked by persistent sadness, loss of interest in activities, and a range of emotional and physical problems.

Drug Overdose

The ingestion or application of a drug in quantities greater than are recommended or generally practiced, leading to a toxic state or death.

Carbon Monoxide Poisoning

Exposure to excessive levels of carbon monoxide gas, which is toxic, leading to symptoms like headache, dizziness, and possibly death.

Firearms

Weapons capable of firing a projectile using gunpowder or another propellant, including guns, rifles, and pistols.