Explanation:
VaR is able to calculate the risk for non-normal distributions; however, VaR estimates may be unreliable in such cases.
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Question 81
As widely used as value at risk (VaR) may be, it is also subject to a number of major limitations. Which of the following is an incorrect statement regarding the limitations of the VaR measure?
A
VaR is unable to calculate the risk for non-normal distributions.
B
VaR does not tell the investor the amount of the actual loss.
C
VaR may be subject to risk of errors resulting from incorrect assumptions used in a model.
D
VaR may be subject to risk of errors resulting from improper implementation of a model.
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