VaR Fails the Following Requirement of a "Coherent" Risk Measure

question 32

Multiple Choice

VaR fails the following requirement of a "coherent" risk measure:

• A)Linear homogeneity.
• B)Monotonicity.
• C)Subadditivity.
• D)Translation invariance.

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Definitions:

Interest Cost

The cost incurred by an entity for borrowing funds, typically reflected as an expense in the income statement.

Pension Expense

The annual cost recognized by an employer for maintaining a retirement plan for its employees.

Actuarial Assumptions

Estimates used to calculate the present and future financial obligations of pension plans and insurance policies, often involving life expectancy and interest rates.

Present Values

The current value of a future amount of money or stream of cash flows, discounted at a particular rate of interest.