FRM II-CR 5

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

FRM II-CR 5

Postby anbu.edu » Mon Sep 08, 2014 11:37 am

Credit value at risk (VaR) incorporates potential losses at a future date at a given probability. Credit VaR is
typically defined in terms of unexpected loss as:
A) the worst-case portfolio loss at a given confidence level over a specific holding period, minus the
expected loss.
B) the worst-case portfolio loss at a given level of significance over a specific holding period, minus the
expected loss.
C) the worst-case portfolio loss at a given confidence level over a specific holding period, minus the loss
given default.
D) the worst-case portfolio loss at a given level of significance over a specific holding period, minus the
loss given default.
Your answer: B was incorrect. The correct answer was A) the worst-case portfolio loss at a given confidence level
over a specific holding period, minus the expected loss

Why cant the answer be B.. What is the difference

edupristine
Finance Junkie
Posts: 722
Joined: Wed Apr 09, 2014 6:28 am

FRM II-CR 5

Postby edupristine » Fri Sep 12, 2014 2:07 pm

Though it seems that B and A are same. But as nomenclature, VaR is always defined with confidence interval like 95% VaR and not 5% Var


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