VAR Quiz 2

naresh.thkr
Good Student
Posts: 25
Joined: Sat Aug 11, 2012 7:02 pm

VAR Quiz 2

Postby naresh.thkr » Sat Nov 10, 2012 10:46 am

11. Which of the following is most accurate with respect to Delta-Normal VaR?
Choose at least one answer.
a. The delta-normal method provides accurate estimates of VaR for options that are at-or-near-the money and close to expiration.
b. The delta-normal method provides accurate estimates of VaR by generating a covariance (correlation) matrix and measuring VaR using relatively simple matrix multiplication.
c. The delta-normal method provides accurate estimates of VaR for assets that can be expressed as a linear or non-linear combination of normally distributed risk factors.
d. The delta-normal method provides accurate estimates of VaR for options and other derivatives over ranges even if deltas are unstable.

Partially correct
Marks for this submission: 0.25/1.

Can we get such type of Q in exam too?

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content.pristine
Finance Junkie
Posts: 356
Joined: Wed Apr 11, 2012 11:26 am

Re: VAR Quiz 2

Postby content.pristine » Mon Nov 12, 2012 6:37 pm

The AIMS with respect to delta-normal VaR are:

• Describe the delta-normal approach to calculating VaR for non-linear derivatives.
• Describe the limitations of the delta-normal method.
• Explain the full revaluation method for computing VaR.
• Compare delta-normal and full revaluation approaches.

So, there is a chance you might see a question like this in the exam..

8-)


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