Question: VAR Measures the potential maximum 1-day loss on the value of positions of an MNC that is exposed to exchange rate movements. Basically it goes

VAR Measures the potential maximum 1-day loss on the value of positions of an MNC that is exposed to exchange rate movements.

Basically it goes to compute how much is the maximum possible loss of MNC going to be if exchange rates move against the firm position.

In Calculating the Value at Risk (VAR), what is the implication of underestimating volatility of exchange rates?

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