Question

A 5% 3-month Value At Risk (VaR) of $1 million represents:

a. A 5% chance of the asset increasing in value by $1 million during the 3-month time frame.
b. The likelihood of a 5% of $1 million decline in the asset over the next 3-month.

c. A 5% decline in the value of the asset after 3 month, per each $1 million of notional.

d. 5% chance of the asset declining in value by $1 million during the 3 month time frame

Answer 1

Explanation:

A 5% 3-month Value At Risk (VaR) of $1 million represents:

a. A 5% chance of the asset increasing in value by $1 million during the 3-month time frame.

b. The likelihood of a 5% of $1 million decline in the asset over the next 3-month.

c. A 5% decline in the value of the asset after 3 month, per each $1 million of notional.

d. 5% chance of the asset declining in value by $1 million during the 3 month time frame