Question #3
Reading: Reading 37 Measuring and Managing Market Risk
PDF File: Reading 37 Measuring and Managing Market Risk.pdf
Page: 1
Status: Correct
Correct Answer: B
Question
A portfolio has a 5% monthly VaR of $2.5 million dollar. Which of the following is most accurate?
Answer Choices:
A. There is a 95% chance of losing $2.5 million in 5% of the months
B. There is a 5% chance of loss in portfolio value of at least $2.5 million in a month
C. There is a 5% chance of losing $2.5 million every month
Explanation
5% monthly VaR indicates the 5% likelihood of a minimum loss in a month.