Explanation:
A 5% VaR (Value at Risk) of $1.5 million means that there is a 5% probability that the portfolio will experience a loss greater than $1.5 million over the specified time period (1 week).
Key points:
$1.5 million, and losses exceeding this amount occur with 5% probability$1.5 million$1.5 million is the maximum loss expected 95% of the time, not the minimum lossTherefore, option C correctly states that a loss of more than $1.5 million over one week is expected 5% of the time.
Ultimate access to all questions.
A 5% VaR of $1.5 million over a 1-week period implies that:
A
there is a 5% chance of losing $1.5 million over one week.
B
$1.5 million is the minimum loss expected over one week 95% of the time.
C
a loss of more than $1.5 million over one week is expected 5% of the time.
No comments yet.