These questions cover the definition and calculation of various risk measures
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Question 1 of 5
Which one of the following is the correct definition of value at risk (VaR)?Correct
The maximum amount that will be lost over a particular holding period with a particular degree of confidenceIncorrect
Question 2 of 5
The 95% ten-day value at risk for a particular portfolio is GBP 250,000. Which of the following could reasonably be the 95% ten-day tail value at risk (tail VaR)?Correct
The tail VaR must be greater than the VaR, as it is the average of the expected losses beyond the VaRIncorrect
Question 3 of 5
Which one of these is not needed for the calculation of the CAPM expected rate of return of an investment X?Correct
The covariance of the return available from the risk-free investment and the universe of investment opportunities is always zeroIncorrect
Question 4 of 5
Which one of these is the correct definition of the information ratio?Correct
Question 5 of 5
Which one of the following statements about the parametric value at risk (VaR) is correct?Correct
Although historical returns may be used to parameterise the distribution used for parametric VaR, they are only needed for empirical VaR; a stochastic asset model is needed for stochastic VaR; whilst the normal distribution is often used, other distributions can be applied; and the calculation of parametric VaR is not computationally intenseIncorrect