VaR-Bases Risk Decomposition Is the Calculation That Allocates the Total

question 17

Multiple Choice

VaR-bases risk decomposition is the calculation that allocates the total VaR of a portfolio to each of its assets or subportfolios. Which of the following statements is most valid?

• A) Risk decomposition is based on the fact that VaR is linearly homogeneous in its constituents.
• B) Risk decomposition assumes that the assets in a portfolio are distributed multivariate normal.
• C) Risk decomposition depends on the sequence in which assets are added to an existing portfolio.
• D) Risk decomposition is not possible if Monte Carlo simulation is used to compute VaR.

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Definitions:

Seeking

The process of actively looking for or attempting to obtain something, such as information, resources, or fulfillment.

Apologizing

The act of expressing regret or sorry for one's actions or words, often used as a means to mend or maintain social relationships.

Guilty

A legal term denoting that someone has been found responsible for committing a crime or offense, or a feeling of having done wrong or committed a misdemeanor.

Acquaintances

Individuals known by someone, but usually not close friends.