Multiple choice questions 1. The market risk department of Trustworthy Bank reports a $5 million overnight VaR
Question:
Multiple choice questions
1. The market risk department of Trustworthy Bank reports a $5 million overnight VaR figure with 99.5 percent confidence level. The bank
(a) Can be expected to lose at most $5 million in 1 out of the next 100 days
(b) Can be expected to lose at least $5 million in 1 out of the next 200 days
(c) Can be expected to lose at most $2.5 million in 1 out of the next 100 days
(d) Can be expected to lose at most $5 million in 1 out of the next 200 days
2. Given two portfolios, X and Y, whose returns are bivariate normal (implying that returns on portfolios of them are also normally distributed), do we have:
(a) VaR(X) + VaR(Y) ≤ VaR(X + Y)?
(b) VaR(X) + VaR(Y) = VaR(X + Y)?
(c) VaR(X) + VaR(Y) ≥ VaR(X + Y)?
(d) None of the above?
3. Drop the normality from the preceding question. So, given two portfolios, X and Y, do we have:
(a) VaR(X) + VaR(Y) ≤ VaR(X + Y)?
(b) VaR(X) + VaR(Y) = VaR(X + Y)?
(c) VaR(X) + VaR(Y) ≥ VaR(X + Y)?
(d) None of the above?
4. Which of the following portfolios is the most risky? Assume 240 trading days per year and 5 trading days a week.
Step by Step Answer:
1 2 only 2 3 3 3 4 The question is unclear If the question is where you can lose most at a given con...View the full answer
International Finance Putting Theory Into Practice
ISBN: 978-0691136677
1st edition
Authors: Piet Sercu
