Question

The maximum one-day loss computed for the value-at-risk (VAR) method does not depend on: Question 37...

The maximum one-day loss computed for the value-at-risk (VAR) method does not depend on:

Question 37 options:

a)

the current level of interest rates.

b)

the expected percentage change in the currency for the next day.

c)

the confidence level used.

d)

the standard deviation of the daily percentage changes in the currency over a previous period.
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Answer #1

The correct answer is The current level of interest rate

Value at risk is a static variable that is used for by various stock exchanges, banks and other financial institutions to Cover off the potential risk in position that investor undertakes. It is undertaken to cover the largest loss that can occur in around 99% of the cases.

The current interest rate is the factor which Var does not depend upon because interest rate does not change frequently like the Stock prices or currency prices.When we trade in the stock market standard deviation is used to know the average daily volatility of the stock.

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