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Basic Question 11 of 19
A 5% VaR implies a ______.
B. 5% chance of a downward move
C. 2.5% chance of a downward move and a 2.5% chance of an upward move
A. 5% potential minimum loss
B. 5% chance of a downward move
C. 2.5% chance of a downward move and a 2.5% chance of an upward move
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Learning Outcome Statements
explain the use of value at risk (VaR) in measuring portfolio risk;
compare the parametric (variance -covariance), historical simulation, and Monte Carlo simulation methods for estimating VaR;
estimate and interpret VaR under the parametric, historical simulation, and Monte Carlo simulation methods;
describe advantages and limitations of VaR;
describe extensions of VaR;
CFA® 2025 Level II Curriculum, Volume 5, Module 41.