FRM 2006 Question

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FRM 2006 Question

Postby swarnendupathak » Fri Oct 19, 2012 4:41 pm

Imagine a portfolio which holds two binary options, each with the same payoff and probability: USD - 100 with a probability of 4% and USD 0 with a 96% probability. Assuming the underlying has uncorrelated returns, what is the VaR (95% confidence level, 1 day)?

A. The VaR is zero
B. The VaR is USD 100
C. The VaR is USD 200
D. None of the above

Please help me with this problem. Plase state the correct answer & process to arive at.



Finance Junkie
Posts: 356
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Re: FRM 2006 Question

Postby content.pristine » Mon Oct 22, 2012 1:16 pm


This question has already been solved.
Check out this link:


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