VAR

rinky63a
Good Student
Posts: 15
Joined: Fri Jul 27, 2012 3:42 pm

VAR

Postby rinky63a » Sun Mar 09, 2014 11:19 am

Pls explain below question :

Which of the following is true for VaR models?
Select one:
a. Returns are assumed to be normally distributed
b. Returns are assumed to be independent and identically distributed
c. VaR usually underestimates extreme risks in case of high volatility Incorrect
d. VaR usually underestimates extreme risks in case of low volatility
Feedback
The correct answer is VaR usually underestimates extreme risks in case of low volatility.

VaR usually underestimates extreme risks in case of high volatility but overestimates in times of lower volatility.
The correct answer is: VaR usually underestimates extreme risks in case of low volatility.

yunusjamal2003
Posts: 1
Joined: Tue Mar 18, 2014 8:55 am

VAR

Postby yunusjamal2003 » Tue Mar 18, 2014 8:58 am

Hi Rinky,

Hope you are in good health. I am also preparing for FRM part 1 . could you please share email id , so we can exchange knowledge . Please email me : yunusjamal2003@gmail.com

pradeeppdy
Finance Junkie
Posts: 258
Joined: Thu Sep 20, 2012 3:42 pm

VAR

Postby pradeeppdy » Tue Apr 01, 2014 10:58 am

VaR usually underestimates extreme risks in case of low volatility. The extreme risks are usually difficult to interpret in times of low volatility .


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