Why are VAR limits more advisable than limits based on notional amount, on sensitivity, and on leverage?

Question:

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For book-img-for-question

Value at Risk The New Benchmark for Managing Financial Risk

ISBN: 978-0071464956

3rd edition

Authors: Philippe Jorion

See More Books

Question Posted: May 03, 2016 02:10 AM

See More Questions

Assume you are in charge of developing the strategy for a multinational company selling products in some 50 countries around the world. One of the issues you face is whether to employ a...
Assume you are in charge of developing the strategy for a multinational company selling products in some 50 different countries around the world. One of the issues you face is whether to employ a...
Suppose that a pension fund imposes strict VAR limits on the active managers. What are the pros and cons of measuring VAR over a short window?
Claud Chapperon is a self-employed distributor of wholesale clothing who began trading on 1 July 2012. His summarised accounts for the year to 30 June 2020 are shown below. The figures in brackets...
The balance in retained earnings on January 1, 2011, for Ola Smith Inc, was $800,000. During the year, the corporation paid cash dividends of $90,000 and distributed a share dividend of $8,000. In...
Bennet Company operates its own power-generating plant. Fixed power cost is distributed to benefiting departments according to standby capacity. Variable power cost is distributed on the basis of a...
Raster Imaging Company has a new management team that has developed an operating plan to improve upon last year's ROE. The new plan would place the debt ratio at 55 percent, which will result in...
Natherson, CPA, is engaged to audit the financial statements of Lewis Lumber for the year ended December 31. Natherson obtained and documented an understanding of internal control relating to the...
The number of customers arriving at Soda Mart follows a Poisson distribution with a mean of 22 customers per hour. What is the probability 40 customers will arrive in two (2) hours?
We have a list of annual rainfall recordings of cities. Each element in the list is of the form (c,r) where c is the city and r is the annual rainfall for a particular year. The list may have...
Explain how settlement risk is a particular category of credit risk.
"Financial markets create a lot of risk due to speculation. They can be compared to the Las Vegas casinos." Comment.
In Chapter 6, the model for an HIV/AIDS patient treated with RTIs was linearized and shown to be It is assumed here that the patient will be treated and monitored using the closed-loop configuration...
How is the power of eminent domain invoked?
General Supplies Corporation (GSC) has not paid any of its fifteen creditors, six of whom have unsecured claims of more than $18,000. Under which chapter of the Bankruptcy Code can the creditors...
What are subsurface rights?
Is it unethical to download a digital file without the owners permission? Discuss.
Steering and targeting occur when a lender convinces a homeowner to refinance soon after obtaining a mortgage. (True/False)
Which financial statement would indicate whether there is enough cash to purchase new equipment and how much money is owed to suppliers? a. Income statement b. Balance sheet c. Statement of owners...
Archangel Corporation prepared the following variance report. Instructions Fill in the appropriate amounts or letters for the question marks in the report. ARCHANGEL CORPORATION Variance...
A gear manufacturer produces gears for a machine. Two processes, casting and forging, are possible for manufacturing, and the parameters of each process are as follows: Assume that the daily demand...
The speed of your automobile has a huge effect on fuel consumption. Traveling at 65 miles per hour (mph) instead of 55 mph can consume almost 20% more fuel. As a general rule, for every mile per hour...
Suppose that four 85-octane gasoline pumps and three 89-octane gasoline pumps provide as much profit at a local convenience store in five days as three 85-octane pumps and five 89-octane pumps...
Match the statements to the protocols * faster more reliable used for sending data TCP UDP both
1. Should managers try to maximize market value of equity or to maximize the accounting value of equity in the balance sheet? Why? 2. What is your understanding of the relationship between risk and...
How much risk is appropriate for a government-run annuity system? Is there an appropriate risk-return calculation to be made? Is Social Security risk free? What about political risk?

Why are VAR limits more advisable than limits based on notional amount, on sensitivity, and on leverage?

Question:

Step by Step Answer:

The notional provides a poor measure of market risk a...View the full answer

Value at Risk The New Benchmark for Managing Financial Risk

Students also viewed these Finance questions