Financial Risk Manager Part 1
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An analyst at Bergman International Bank has been asked to explain the calculation of VaR for linear derivatives to the newly hired junior analysts. Which of the following statements best describes the calculation of VaR for a linear derivative on the S&P 500 Index?
A
For a futures contract, multiply the VaR of the S&P 500 Index by a sensitivity factor reflecting the percent change in the value of the futures contract for a 1% change in the index value.
B
For an options contract, multiply the VaR of the S&P 500 Index by a sensitivity factor reflecting the percent change in the value of the futures contract for a 1% change in the index value.
C
For a futures contract, divide the VaR of the S&P 500 Index by a sensitivity factor reflecting the absolute change in the value of the futures contract per absolute change in the index value.
D
For an options contract, divide the VaR of the S&P 500 Index by a sensitivity factor reflecting the percent change in the value of the futures contract for a 1% change in the index value.