Question #13
Reading: Reading 37 Measuring and Managing Market Risk
PDF File: Reading 37 Measuring and Managing Market Risk.pdf
Page: 5
Status: Correct
Correct Answer: A
Question
Which of the following approaches to conducting scenario analysis on a portfolio of stock options is most accurate?
Answer Choices:
A. Value the portfolio based on the parameters identified in the scenario
B. Evaluate the impact on the portfolio owning to changes in volatility
Explanation
Scenario analysis involves fully repricing the asset based on the values of the risk factors
in the identified scenario. Evaluating the effect on portfolio value due to changes in a
single risk factor is done for sensitivity analysis and not scenario analysis.