Answer: The most common practice is to plot the two VaR models over time, and this method is considerably informative in comparing the models.

## 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.

Author: LeetQuiz .