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Q-30. A bank conducted a backtest of its 95% daily value at risk (VaR) and observed 19 exceptions — i.e., the number of days where the daily P&L loss exceeded the VaR — over the last year.
A
The VaR model is correctly calibrated.
B
The VaR model is understating risk.
C
The VaR model is overstating risk.
D
The backtest results are inconclusive.