10-47 in Calculating the VAR of Fixed-Income Securities in the RiskMetrics

question 16

Multiple Choice

10-47 In calculating the VAR of fixed-income securities in the RiskMetrics model

• A)the VAR is related in a linear manner to the DEAR.
• B)the price volatility is the product of the modified duration and the adverse yield change.
• C)the yield changes are assumed to be normally distributed.
• D)All of the above.
• E)Answers B and C only.

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Definitions:

Nomothetic

An approach in psychology focused on studying and identifying general laws that apply to all individuals, as opposed to idiographic methods which highlight individual differences.

Monotheistic

Relating to or characterized by the belief in the existence of only one god.

Personality Trait

Enduring characteristics or qualities that define an individual's behavior and attitude.

Personality State

Temporary behaviors or feelings that can change depending on the situation, distinct from longer-term personality traits.