Explanation

Option A is correct because:

• Benchmarking in risk management typically involves comparing a bank's internal VaR (Value at Risk) model with an alternative model
• Plotting the two VaR models over time is indeed a common practice
• This graphical comparison provides valuable insights into how the models behave relative to each other across different market conditions
• It helps identify periods where the models diverge significantly, which can indicate potential issues or different risk sensitivities

Option B is incomplete and cannot be properly evaluated as a statement about benchmarking practices. The sentence cuts off mid-phrase, making it impossible to determine its accuracy or completeness.

In benchmarking exercises, financial institutions often:

• Compare their internal models against regulatory standard models
• Use statistical tests to evaluate model performance
• Assess model stability and consistency over time
• Identify potential model weaknesses or areas for improvement

The graphical comparison method mentioned in Option A is particularly useful because it allows risk managers to visually assess how different models respond to market movements and whether they provide consistent risk estimates.