Question: A risk manager is presented with a Value at Risk (VaR) measure for two portfolios, Port1 and Port2. The VaR is a single statistic intended

A risk manager is presented with a Value at Risk (VaR) measure for two portfolios, Port1 and Port2. The VaR is a single statistic intended to express the maximum one day loss within a 99% confidence limit. Both VaRs are within policy limits. But the VaR of Port1 is much less than the VaR of Port2. The risk manager must decide which portfolio is more exposed to a sudden large jump in market rates - outliers exceeding the 99% confidence limit.

Select one:

a. Port2 is definitely safer than Port1.b. Port2 may be more exposed than Port1c. Port1 is definitely safer than Port2.d. Port1 may be more exposed than Port2e. Neither portfolio can produce unexpected results

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