Financial Risk Manager Part 2
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Ultimate access to all questions.
In the context of the Basel regulatory framework, what is the most likely reason for a bank to face a penalty if it has experienced more than four instances of breaching its 1-day 99% Value at Risk (VaR) threshold over the past 250 trading days?
A
A large move in interest rates occurs in conjunction with a small move in correlations.
B
The bank's model calculates interest rate risk based on the median duration of the bonds in the portfolio.
C
A sudden market crisis in an emerging market, which leads to losses in the equity positions in that country.
D
A sudden devastating earthquake that causes major losses in the bank's key area of operation.