Finance Junkie
Posts: 205
Joined: Mon Feb 04, 2013 3:35 pm


Postby » Wed Apr 03, 2013 11:51 pm

Which value at risk methodology is most subject to model risk?

A) Parametric.
B) Variance/covariance.
C) Monte Carlo simulation.
D) Historical.
View Answer
Monte Carlo simulation is subject to model risk.
Source: schweser
My doubt is even paramatic approaches have model risk. If so why C is the correct answer

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


Postby content.pristine » Fri Apr 05, 2013 5:11 pm

Dear Anbu,

Such questions like these arise in the exam where more than one answer seems correct.
Here MCS is MORE subject to model risk than the others..

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