The Use of Expected Shortfall (ES) to Measure Market Risk

question 86

Multiple Choice

The use of expected shortfall (ES) to measure market risk of a portfolio assumes which of the following?

• A)There is a very small sample size (<30 observations) used to estimate probability distributions.
• B)That the probability distribution is skewed to the left.
• C)That changes in asset prices are normally distributed but with fat tails.
• D)That the probability distribution is skewed to the right.
• E)That changes in asset prices follow a standard normal probability distribution.

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Definitions:

Ladder Program

A graphical programming language resembling a ladder used for programming PLCs, where the vertical lines represent the power supply and each rung represents a rule executed by the PLC.

Total Memory

The aggregate amount of digital storage capacity available in a computer system or device, encompassing RAM, ROM, and any other data storage types.

PLC System

A Programmable Logic Controller system, which is a digital computer used for automation of industrial processes, such as control of machinery or factory assembly lines.

User Program

A sequence of instructions created by an end-user or developer, intended to be executed by a computer or another digital machine to perform specific tasks or solve problems.