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Basic Question 16 of 19
Which is NOT a limitation of VaR?
B. It sometimes underestimates left-tail events.
C. It focuses heavily on fat tails.
A. It ignores the right tail.
B. It sometimes underestimates left-tail events.
C. It focuses heavily on fat tails.
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I was very pleased with your notes and question bank. I especially like the mock exams because it helped to pull everything together.
Martin Rockenfeldt
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.