Explanation:
Correct Answer: C
Explanation: Enterprise-wide Value at Risk (VaR) typically aggregates major, easily quantifiable risks like market risk and credit risk. However, it is fundamentally a static measure that often struggles to effectively capture liquidity risk, and specifically funding liquidity risk. Funding liquidity risk relates to a firm's capability to meet its cash flow obligations, which varies significantly depending on specific firm events and market stress scenarios that are generally not fully parameterized into a standard VaR framework.
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Q.4 Enterprise-wide VaR is not likely to account for all types of risk. In particular, enterprise-wide VaR may not factor in:
A
Credit risk
B
Market risk
C
Funding liquidity risk
D
None of the above. Enterprise-wide risk is likely to account for all types of risk.