You are in the risk management department at ABC Bank. You are responsible for producing the VaR(1, 95%) that covers all of the banks currency traders. Explain why your boss would be unhappy if your Value-at-Risk (VaR) estimates were exceeded only 2% of the time. Also explain why your boss would be displeased if your VaR estimates were exceeded 8% of the time. Which would you consider to be a more concerning mistake?
You are in the risk management department at ABC Bank. You are responsible for producing the VaR(1, 95%) that covers all of the banks currency traders. Explain why your boss would be unhappy if your Value-at-Risk (VaR) estimates were exceeded only 2% of the time. Also explain why your boss would be displeased if your VaR estimates were exceeded 8% of the time. Which would you consider to be a more concerning mistake?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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You are in the risk management department at ABC Bank. You are responsible for producing the VaR(1, 95%) that covers all of the banks currency traders. Explain why your boss would be unhappy if your Value-at-Risk (VaR) estimates were exceeded only 2% of the time. Also explain why your boss would be displeased if your VaR estimates were exceeded 8% of the time. Which would you consider to be a more concerning mistake?
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