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A financial institution aims to integrate stressed Value at Risk (VaR) into its market risk assessment metrics. To facilitate this process, a risk management professional within the organization is analyzing the differences between stressed VaR and traditional VaR. This analysis includes examining appropriate data sets, selecting relevant time frames, and considering underlying statistical distributions. What is a key characteristic of stressed VaR that differentiates it from traditional VaR?
A
Stressed VaR is based on an unconditional loss distribution rather than a conditional loss distribution.
B
Stressed VaR typically uses much longer time horizons, often several months or years.
C
Stressed VaR uses a different assumed probability distribution as an input compared to traditional VaR.
D
Stressed VaR is not necessarily based on data from the immediately preceding period, unlike traditional VaR.