The Use of Expected Shortfall (ES) Is Most Appropriate When

question 65

Multiple Choice

The use of expected shortfall (ES) is most appropriate when

• A)there is a small sample size used to estimate probability distributions.
• B)the VAR indicates there is no possibility of losses so another method must be used to determine market risk.
• C)the probability distribution is skewed to the right.
• D)a continuous probability distribution cannot be constructed.
• E)The probability distribution indicates there is a possibility of a "fat tail" loss.

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Definitions:

Perpetual Inventory System

An inventory management system that updates item records continuously as transactions occur, providing a real-time view of inventory levels.

Merchandise Returned

Items sent back to the seller by the buyer due to defects, dissatisfaction, or other reasons, often part of a refunds or exchanges process.

FOB Destination

A shipping term indicating that the seller owns the goods in transit and is responsible for freight charges and any damage until the goods are delivered to the buyer’s location.

Freight Costs

Expenses associated with transporting goods between the vendor and the buyer, which may be borne by either party.