CFA Practice Question

There are 119 practice questions for this study session.

CFA Practice Question

There are two assets in a portfolio. Assume the distribution of each asset'??s returns is normal. To estimate its parametric VaR, the ______ is (are) needed.

I. expected return of each asset
II. standard deviation of each asset
III. covariance between the 2 assets
IV. skewness of each asset
V. kurtosis of each asset
Correct Answer: I, II and III

The parametric method of VaR estimation typically provides a VaR estimate from the left tail of a normal distribution, incorporating the expected returns, variances, and covariances of the components of the portfolio.

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