Financial Risk Manager Part 2
Get started today
Ultimate access to all questions.
Comments
Loading comments...
Ultimate access to all questions.
An analyst at bank LKS has been asked to validate the bank's VaR model through backtesting. The analyst uses two sets of returns data to generate results of predicted and actual losses that can be compared in the validation process. Which of the following correctly describes the two most appropriate sets of returns data to use in backtesting?
A
The actual returns, which correspond to the total return on the bank's trading portfolio, and the hypothetical returns, which represent the returns obtained from freezing the starting positions in the bank's trading portfolio
B
The cleaned returns, which are the actual returns minus any profit and loss from intraday trades, and the actual returns, which correspond to the total returns on the bank's trading portfolio
C
The hypothetical returns, which represent the returns obtained from freezing the starting positions in the bank's trading portfolio, and the cleaned returns, which are the actual returns minus any profit and loss from intraday trades
D
The trading returns, which are the actual returns minus any fees and commissions, and the hypothetical returns, which represent the actual returns obtained from freezing the starting positions in the bank's trading portfolio